<PAGE>
As filed with the United States Securities and Exchange Commission
on May 22, 2000
Registration No. 333-31920
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DENDREON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 2834 22-3203193
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
3005 First Avenue
Seattle, Washington 98121
(206) 256-4545
(Address, including zip code and telephone number, including area code of
registrant's principal executive offices)
Christopher S. Henney, Ph.D., D.Sc.
President and Chief Executive Officer
3005 First Avenue
Seattle, Washington 98121
(206) 256-4545
(Name, address, including zip code and telephone number, including area code
of agent for service)
---------------
Copies to:
Julie M. Robinson, Esq. Rodd M. Schreiber, Esq.
Cooley Godward LLP Skadden, Arps, Slate, Meagher & Flom
4365 Executive Drive, Suite 1100 (Illinois)
333 West Wacker Drive Chicago, Illinois 60606
San Diego, California 92121-2128 Tel: (312) 407-0700
Tel: (858) 550-6000 Fax: (312) 407-0411
Fax: (858) 463-3555
---------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this 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, 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, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Title of Each Class Proposed Maximum Proposed Maximum
of Securities Amount to be Offering Price Aggregate Amount of
to Be Registered Registered (1) Per Share (2) Offering Price (2) Registration Fee (3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value................. 5,175,000 $14.00 $72,450,000 $19,127
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 675,000 shares the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) under the Securities Act solely for the
purpose of calculating the registration fee.
(3) Previously paid.
---------------
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 this
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 prospectus is not complete and may be changed. +
+Dendreon may not sell these securities until the registration statement filed +
+with the Securities and Exchange Commission is effective. This prospectus is +
+not an offer to sell these securities and it is not soliciting an offer to +
+buy these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION - MAY 22, 2000
PROSPECTUS
- --------------------------------------------------------------------------------
4,500,000 Shares
[LOGO OF DENDREON CORPORATION]
Common Stock
- --------------------------------------------------------------------------------
Dendreon Corporation is offering 4,500,000 shares of its common stock in an
initial public offering. Prior to this offering, there has been no public
market for Dendreon's common stock.
Dendreon discovers and develops immunologically based therapeutic products for
the treatment of cancer.
It is anticipated that the public offering price will be between $12.00 and
$14.00 per share. Application has been made to include the common stock for
quotation in the Nasdaq National Market under the symbol "DNDN".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price............................. $ $
Underwriting discounts and commissions............ $ $
Proceeds, before expenses, to Dendreon............ $ $
</TABLE>
See "Risk Factors" on pages 8 to 16 for factors that should be considered
beforeinvesting in the shares of Dendreon.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may purchase up to 675,000 additional shares from Dendreon to
cover over-allotments.
Prudential Vector Healthcare
a unit of Prudential Securities
SG Cowen
Pacific Growth Equities, Inc.
, 2000
<PAGE>
DESCRIPTION OF ARTWORK
Inside Front Cover
Headline: Dendreon Corporation Product Pipeline
Illustration: A chart is pictured which lists products in the left-hand column
and the terms "Research", "Preclinical", "Phase I", "Phase II", "Phase III" and
"FDA Approved" in a row across the top of six columns. Each product's
development is illustrated by the column location where a corresponding bar
terminates. The products are separated into three categories, which are each
entitled "Therapeutic Vaccines", "Therapeutic Antibodies" and "Cell Separation
Products". The "Therapeutic Vaccines" section includes "Provenge/TM/", with a
bar extending to the column entitled "Phase III", "Mylovenge/TM/", with a bar
extending to the column entitled "Phase II", "APC8024", "APC80NY" and "APC80TR"
all of which have a bar extending to the column entitled "Preclinical". The
section entitled "Therapeutic Antibodies" includes "Danton/TM/" and
"Dantes/TM/", both of which have a bar extending to the column entitled
"Preclinical". The section entitled "Cell Separation Products" includes
"DACS(R)SC Kit" with a bar extending to the column entitled "FDA Approved".
Bi-fold first page in Prospectus
Headline: Therapeutic Cancer Vaccine Approach
Illustration: A two-part illustration is pictured. The first part of this
illustration is at the top left of the bi-fold page and is entitled "Antigen
Delivery Cassette/TM/" and depicts the Antigen Delivery Cassette and its three
component parts, labeled the "Antigen", the "Antigen Processing Region" and the
"Dendritic Cell Binding Region." The second part of the illustration has six
images. The first image depicts the Antigen Delivery cassette approaching a
dendritic cell entitled "1. Antigen Delivery Cassette is Co-cultured with
Immature Dendritic Cell." The second image is entitled "2. Antigen Delivery
Cassette Binds to Immature Dendritic Cell" and depicts the Antigen Delivery
Cassette attached to an Immature Dendritic Cell. The third image is entitled "3.
Antigen is Processed and Dendritic Cell Begins to Mature" and depicts the
Antigen Delivery Cassette inside the Dendritic Cell. The fourth image is
entitled "4. Maturing Dendritic Cell Begins to Present Antigen" and depicts a
maturing Dendritic Cell processing the Antigen. The fifth image is entitled "5.
Fully Mature Dendritic Cell Presents Antigen to T-cells, thus Inducing a
Cell-mediated Immune Response" and depicts Antigen leaving the Mature Dendritic
Cell and attaching itself to three T-cells. The sixth image entitled "6. T-cells
Proliferate and Attach Tumor Cells" depicts numerous T-cells and a tumor cell
with five T-cells attached to it.
1.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................................................. 4
Risk Factors....................................................... 8
Forward-Looking Statements......................................... 17
Use of Proceeds.................................................... 18
Dividend Policy.................................................... 18
Dilution........................................................... 19
Capitalization..................................................... 20
Selected Financial Data............................................ 21
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 22
Business........................................................... 27
Management......................................................... 44
Certain Relationships and Related Transactions..................... 53
Principal Stockholders............................................. 55
Description of Capital Stock....................................... 57
Shares Eligible for Future Sale.................................... 60
Underwriting....................................................... 62
Legal Matters...................................................... 63
Experts............................................................ 63
Where You Can Find Additional Information.......................... 64
Index to Financial Statements...................................... F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in the prospectus.
This summary does not contain all of the information that you should consider
before investing in our common stock. You should read the entire prospectus
carefully.
Dendreon
We discover and develop therapeutic vaccines that stimulate a patient's
immunity for the treatment of cancer. We combine our expertise in immunology
with our methods for modifying tumor antigens, the targets of the immune
system, and our technology for cell separation to develop therapeutic vaccines
that stimulate cancer-fighting cells. Our most advanced product candidate,
Provenge(TM), is a therapeutic vaccine for the treatment of prostate cancer. We
have completed initial safety and efficacy testing for Provenge and it has
entered the next stage of testing, commonly referred to as Phase III clinical
trials. In January and April 2000, we began two Phase III clinical trials that
are designed to demonstrate Provenge's efficacy and, if successful, support an
application for regulatory approval of Provenge by the Food and Drug
Administration. In addition, we are conducting two initial efficacy trials,
commonly known as Phase II clinical trials, of Mylovenge(TM), our therapeutic
vaccine for some cancers of the blood, including multiple myeloma. We have
three additional therapeutic vaccines in preclinical development for the
treatment of common malignancies, including breast, colorectal, lung and
ovarian/uterine cancers. We also intend to pursue the application of our
technologies in the fields of autoimmune diseases, allergies and infectious
diseases. We plan to retain commercialization rights for our products in the
United States and partner our products in other parts of the world. We are
collaborating with Kirin Brewery Co., Ltd. for the marketing and development of
our products in Asia.
Cancer and Cancer Therapy
The American Cancer Society estimates that doctors will diagnose
approximately 1.2 million new cases of cancer in the United States in 2000.
Cancer, the second leading cause of death in the United States, will result in
an estimated 552,000 deaths in 2000. Cancer costs are estimated at $107 billion
annually, including health care expenditures and lost productivity from illness
and death. Spending on cancer therapeutic drugs was $7.4 billion in the United
States in 1998. Cancer is characterized by abnormal cells that proliferate
uncontrollably and spread throughout the body, forming collections of tumor
cells called metastases. To be effective, cancer therapy must eliminate the
cancer both at its site of origin and at sites of metastases. Current
treatments for cancer include surgery, radiation, hormone therapy and
chemotherapy. Treatments known as immunotherapy are designed to stimulate the
body's natural mechanism for fighting diseases. We believe immunotherapy may
overcome many of the limitations of current cancer therapies by enabling the
immune system to recognize and destroy cancerous cells. Immunotherapy may be
particularly useful for the treatment of residual disease, the small tumor
masses, including metastases, which may remain following conventional therapy.
Our Therapeutic Cancer Vaccine Approach
The immune system protects against disease by recognizing specific chemical
structures known as antigens. In the presence of antigens associated with
diseased cells, a specialized class of cells known as dendritic cells are
activated to take up and process the antigen. These activated dendritic cells
then sensitize another class of cells known as lymphocytes, which seek out and
eliminate diseased cells. Tumors, however, create an environment that
suppresses the maturation of dendritic cells, preventing their activation. Our
vaccines are based on our ability to manipulate dendritic cells. Our
proprietary devices for cell separation allow us to isolate dendritic cells
from the blood and activate them to process tumor antigens. Our proprietary
approach for antigen modification, called Antigen Delivery Cassette(TM)
technology, allows us to engineer, or modify, the structure of tumor antigens
and add proprietary elements that augment the uptake and processing of the
antigen by dendritic cells, thereby increasing the potency of the immune
response.
Benefits of Our Approach
Our therapeutic vaccines may offer novel treatment alternatives for cancers
that currently are not adequately addressed. Benefits of our therapeutic
vaccines may include:
. Vigorous stimulation of cancer-fighting cells: The results of our
clinical trials to date have demonstrated that our vaccines have the
potential to stimulate the body's own defenses to fight cancer.
4
<PAGE>
. Minimal side effects: Our vaccines specifically target cancerous cells,
and the results of our clinical trials have shown them to be well
tolerated by patients.
. Applicability to a wide variety of cancers: Our ability to identify and
modify antigens and our technologies for isolating cells from blood
enable us to create proprietary vaccines for the potential treatment of
a wide variety of cancers.
. Single vaccine can treat multiple cancers: We identify novel antigens
that are shared by multiple types of cancer. We believe this approach
will allow us to develop single vaccines for the treatment of several
different tumors.
. Access broad patient population: We select antigens that are present on
a significant percentage of cancer patients' tumors. For example, our
prostate cancer vaccine antigen is found on approximately 95% of
prostate cancers.
. Cost-effective manufacturing process: We have developed a manufacturing
process that employs our proprietary cell separation systems that can
produce vaccines on a cost-effective basis.
. Simple, convenient therapy: Our vaccines are delivered as 30-minute
infusions in an outpatient procedure. Patients complete a course of
treatment in one month.
Our Therapeutic Vaccines
We are conducting two Phase III clinical trials for our lead product,
Provenge, for the treatment of patients with advanced prostate cancer. There
are currently over one million men with prostate cancer in the United States,
with 180,000 new cases and 32,000 deaths estimated in 2000. There is currently
no treatment that increases long-term survival of patients with advanced
prostate cancer. We have completed three safety and dose-determining trials,
commonly referred to as Phase I clinical trials, for Provenge. Additionally, we
have completed two Phase II clinical trials, which suggest that Provenge will
be safe and may be effective in treating patients with advanced prostate cancer
that is resistant to standard treatment with hormones. Based upon historical
data, we would have expected that 50% of untreated patients at a similar stage
of disease as the patients in our trials would have experienced disease
progression at 12 weeks, 75% at 30 weeks, and 90% at one year. In our trials,
patients experienced a significant decrease in the rate of progression of the
disease: 53% had stabilized at 28 weeks, and 26% were stable for greater than
one year. In addition, less than two percent of Provenge infusions were
associated with significant side effects.
We are conducting two Phase II clinical trials of our therapeutic cancer
vaccine, Mylovenge, in patients with multiple myeloma, a cancer of the blood,
and amyloidosis, a complication of multiple myeloma. It is estimated that in
2000, 13,600 individuals in the United States will be diagnosed with multiple
myeloma and over 11,000 individuals will die from the disease. Amyloidosis,
which eventually results in death from organ failure, afflicts approximately
2,500 individuals in the United States annually. In our trials, 31 of 58
patients, or 53%, experienced major tumor reductions or disease stabilization
lasting more than six months. In one of these studies, four of 15 patients
treated with Mylovenge, whose cancers were resistant to massive doses of
chemotherapy, experienced a complete disappearance of multiple myeloma. In the
other trial, 17 of 43 patients treated with Mylovenge experienced minor tumor
reductions or disease stabilization lasting six months or longer. The results
of these trials provide preliminary evidence that Mylovenge is safe and may be
effective in treating multiple myeloma.
We have three vaccine products, APC8024, APC80NY and APC80TR, in preclinical
development for the treatment of breast, lung, colorectal and ovarian/uterine
cancers. We expect to enter clinical trials in 2000 with APC8024 for the
treatment of breast, ovarian and colorectal cancers. In addition, we have two
antibody products in preclinical development, including Danton for the
treatment of numerous blood-borne tumors, and Dantes for the treatment of
autoimmune diseases.
About Us
We were incorporated in Delaware in August 1992. Our principal executive
offices are located at 3005 First Avenue, Seattle, Washington 98121, and our
telephone number is (206) 256-4545. Dendreon(TM), the Dendreon logo,
Mylovenge(TM), Provenge(TM), Antigen Delivery Cassette(TM) and DACS(R) are
trademarks of Dendreon. This prospectus also includes trademarks and tradenames
of other companies.
5
<PAGE>
The Offering
Shares offered by Dendreon............
4,500,000 shares
Total shares outstanding after this
offering.............................. 20,756,155 shares
Use of proceeds....................... To fund clinical trials, research,
preclinical and commercialization
activities for our therapeutic vaccine
products, to increase our dendritic
cell processing and antigen
manufacturing capacity and for general
corporate purposes, including working
capital. We may also use a portion of
the net proceeds to acquire
complementary technologies or products.
Proposed Nasdaq National Market
symbol................................ DNDN
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of March 31, 2000, and includes
the sale of approximately 384,615 shares of our common stock at the assumed
initial public offering price to Kirin Brewery Co., Ltd., in a private
placement concurrent with the closing of this offering. However, it does not
include, as of March 31, 2000, the following:
. 1,254,595 shares of common stock available for future issuance under our
2000 Equity Incentive Plan and 1,929,263 shares of common stock issuable
on exercise of outstanding stock options;
. 1,485,000 shares reserved for issuance under our 2000 Employee Stock
Purchase Plan;
. 532,543 shares of common stock issuable on exercise of outstanding
warrants; and
. up to 675,000 shares that the underwriters may purchase if they exercise
their over-allotment option in full.
Unless otherwise noted, the information in this prospectus assumes:
. a 1.1-for-1 stock split of the common stock to be completed prior to the
effectiveness of this offering;
. the mandatory conversion of all outstanding shares of our preferred stock
under the terms of our certificate of incorporation into 14,386,945
shares of common stock upon closing of this offering;
. the filing of our amended and restated certificate of incorporation; and
. the underwriters have not exercised their over-allotment option.
6
<PAGE>
Summary Financial Information
The summary financial data should be read in conjunction with our financial
statements and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The financial results for the three months ended March 31, 2000 are
unaudited.
The pro forma as adjusted balance sheet data presented below gives effect to
the receipt of the net proceeds from the sale of 4,500,000 shares of our common
stock in this offering at an assumed initial public offering price of $13.00
per share, after deducting underwriting discounts and commissions and estimated
offering expenses, and the net proceeds from the sale of 384,615 shares of
common stock to Kirin concurrent with the completion of this offering in a
private placement at the public offering price.
<TABLE>
<CAPTION>
Three
Months Ended
Year Ended December 31, March 31,
-------------------------- ----------------
1997 1998 1999 1999 2000
------- ------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenue................... $ 793 $ 1,849 $ 3,519 $ 636 $ 1,131
Total operating expenses........ 8,184 10,957 16,332 3,865 4,905
Loss from operations............ (7,391) (9,108) (12,813) (3,229) (3,774)
Net loss........................ (7,163) (9,390) (12,718) (3,164) (3,712)
Net loss attributable to common
stockholders................... (7,163) (9,390) (13,003) (3,164) (7,822)
Basic and diluted net loss per
common share................... (21.37) (14.92) (13.75) (4.46) (6.13)
Shares used in computation of
basic and diluted net loss per
common share................... 335 630 946 709 1,275
Pro forma basic and diluted net
loss per share................. $ (1.09) $ (0.51)
Pro forma shares used in
computation of basic and
diluted net loss per share
(1)............................ 11,963 15,306
</TABLE>
<TABLE>
<CAPTION>
March 31, 2000
-------------------
Pro Forma
Actual As Adjusted
------- -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments........... $14,265 $72,170
Working capital............................................. 10,220 68,508
Total assets................................................ 18,965 77,253
Long-term obligations, less current portion................. 2,495 2,495
Total stockholders' equity.................................. 7,523 65,428
</TABLE>
- --------
(1) See Note 8 of notes to financial statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share.
7
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information set forth in this prospectus, before purchasing shares
of our common stock. Each of these risk factors could harm our business,
operating results and financial condition, as well as decrease the value of an
investment in our common stock. This investment involves a high degree of
risk.
Risks Related To Our Business
If we are not able to demonstrate the efficacy of our prostate cancer and
multiple myeloma vaccines in our clinical trials or if our clinical trials
for these vaccines are delayed, we may be unable to commercialize any
products or generate revenues to sustain operations.
Our research and development programs are at an early stage. We are
currently enrolling patients in our two Phase III clinical trials involving
Provenge, our prostate cancer vaccine. Clinical testing is a long, expensive
and uncertain process. A minimum of 18 months will likely elapse before we
learn the results of this prostate cancer vaccine clinical trial.
We have not yet sought FDA approval for any vaccine product. The data
collected from our clinical trials may not be sufficient to support approval
by the FDA of Provenge or any of our vaccine products. The clinical trials of
Provenge, Mylovenge, our multiple mylemoma vaccine, and our other products
under development may not be completed on schedule and the FDA may not
ultimately approve any of our product candidates for commercial sale.
Furthermore, even if initially positive preclinical studies or clinical trial
results are achieved, as in our prostate cancer and multiple myeloma clinical
trials, it is possible that we will obtain different results in the later
stages of drug development, including when tested on a larger patient
population. It is also possible that the data collected from our clinical
trials, even if positive, will not be sufficient to support FDA or other
regulatory approvals. Our vaccines in later stages of clinical development may
fail to show the desired safety and efficacy despite having progressed through
initial clinical testing.
The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, often takes many years and can vary substantially
based upon the type, complexity and novelty of the products involved. We have
had only limited experience in filing and pursuing applications necessary to
gain regulatory approvals. Provenge, Mylovenge and our other products are
novel; therefore, regulatory agencies lack experience with them which may
lengthen the regulatory review process, increase our development costs and
delay or prevent commercialization of Provenge, Mylovenge and our other
products.
The clinical trials of any of our cancer vaccines could fail, which would
prevent us from commercializing our products. No cancer vaccine using
dendritic cell technologies has been approved for marketing. Consequently,
there is no precedent for the successful commercialization of products based
on our technologies. A setback in the development of Provenge or Mylovenge
could cause a decline in our stock price and could reflect negatively on our
other immunotherapy products. Our failure to develop Provenge, Mylovenge and
other safe, commercially viable cancer vaccines would significantly impair our
ability to generate revenues to sustain operations.
We have a history of operating losses; we expect to continue to incur
losses and we may never be profitable.
As of March 31, 2000, we had an accumulated deficit of $54.5 million. These
losses have resulted principally from costs incurred in our research and
development programs and from our general and administrative costs. We have
derived no significant revenues from product sales or royalties. We do not
expect to achieve significant product sales or royalty revenue for a number of
years, and are not able to predict when we might do so. We expect to incur
additional operating losses in the future. These losses may increase
significantly as we expand development and clinical trial efforts.
Our ability to achieve long-term profitability is dependent upon obtaining
regulatory approvals for our products and successfully commercializing our
products alone or with third parties. However, our operations may not be
profitable even if any of our products under development are commercialized.
8
<PAGE>
We may require additional funding, and our future access to capital is
uncertain.
Developing cancer vaccines and conducting clinical trials for the vaccines
are expensive. We plan to continue to simultaneously conduct clinical trials
and preclinical research for many different cancer and autoimmune disease
vaccines, which is costly. Our future revenues may not be sufficient to support
the expenses of our operations and the conduct of our clinical trials and
preclinical research. We will need to raise additional capital:
. to fund operations;
. to continue the research and development of our therapeutic vaccines; and
. to commercialize our vaccines.
We believe that the net proceeds of this offering, together with the
proceeds from the sale of our common stock in a private placement concurrent
with this offering, our cash on hand and cash generated from our collaborative
arrangements will be sufficient to meet our projected operating and capital
requirements for at least the next 24 months. However, we may need additional
financing within this timeframe depending on a number of factors, including the
following:
. our degree of success in commercializing cancer vaccine products;
. the amount of milestone payments we receive from our collaborators;
. the rate of progress and cost of our research and development and
clinical trial activities;
. the costs of preparing, filing, prosecuting, maintaining and enforcing
patent claims and other intellectual property rights;
. emergence of competing technologies and other adverse market
developments;
. changes in or terminations of our existing collaboration and licensing
arrangements; and
. the cost of manufacturing scale-up and development of marketing
operations, if we undertake those activities.
Additional financing may not be available on favorable terms or at all. If
we are unable to raise additional funds when we need them, we may be required
to delay, reduce or eliminate some or all of our development programs and some
or all of our clinical trials. We also may be forced to license technologies to
others that we would prefer to develop internally. If we raise additional funds
by issuing equity securities, further dilution to stockholders may result, and
new investors could have rights superior to holders of shares issued in this
offering.
Our clinical trials could take longer to complete than we project or may not
be completed at all.
Although for planning purposes we project the commencement, continuation and
completion of clinical trials, the actual timing of these events may be subject
to significant delays relating to various causes, including scheduling
conflicts with participating clinicians and clinical institutions, and
difficulties in identifying and enrolling patients who meet trial eligibility
criteria. Clinical trials involving any of our products may not commence or be
completed as projected or may not be conducted successfully.
We have limited experience in conducting clinical trials. We rely on
academic institutions or clinical research organizations to conduct, supervise
or monitor some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these clinical
trials than if we conducted them entirely on our own. Failure to commence or
complete, or delays in, any of our planned clinical trials could adversely
affect our stock price and our ability to conduct our business as currently
planned.
9
<PAGE>
If testing of a particular product does not yield successful results, then
we will be unable to commercialize that product.
If preclinical or clinical testing of one or more of our cancer vaccines or
other products does not yield successful results, the product will fail. To
achieve the results we need, we must demonstrate our products' safety and
efficacy in humans through extensive preclinical and clinical testing. Numerous
unforeseen events may arise during, or as a result of, the testing process,
including the following:
. safety and efficacy results attained in early human clinical trials may
not be indicative of results that are obtained in later clinical trials;
. the results of preclinical studies may be inconclusive, or they may not
be indicative of results that will be obtained in human clinical trials;
. after reviewing test results, we or our collaborators may abandon
projects that we might previously have believed to be promising;
. we, our collaborators or regulators, may suspend or terminate clinical
trials if the participating subjects or patients are being exposed to
unacceptable health risks; and
. potential products may not have the desired effect or may have
undesirable side effects or other characteristics that preclude
regulatory approval or limit their commercial use if approved.
Clinical testing is very expensive and can take many years. The failure to
adequately demonstrate the safety and efficacy of a cancer vaccine under
development would delay or prevent regulatory approval of the vaccine, which
could prevent us from achieving profitability.
We are subject to extensive regulation, which can be costly, time consuming
and subject us to unanticipated delays; even if we obtain regulatory
approval for some of our products, those products may still face regulatory
difficulties.
All of our potential products, cell processing and manufacturing activities,
are subject to comprehensive regulation by the FDA in the United States and by
comparable authorities in other countries. Violations of regulatory
requirements at any stage, whether before or after marketing approval is
obtained, may result in fines, forced removal of a product from the market and
other adverse consequences including delay, which could materially harm our
financial results. Additionally, we may not be able to obtain the labeling
claims necessary or desirable for the promotion of our products. We may also be
required to undertake post-marketing trials. In addition, identification of
side effects after any of our vaccines are on the market, or the occurrence of
manufacturing problems, could cause subsequent withdrawal of approval,
reformulation of our vaccines, additional clinical trials, changes in labeling
of our vaccines, and additional marketing applications.
Even if our cancer vaccines are approved, they might not be accepted in the
marketplace.
The commercial success of Provenge and our other cancer vaccines will depend
upon their acceptance by the medical community and third party payors as
clinically useful, cost effective and safe.
A number of factors may affect the rate and level of market acceptance,
including:
. regulatory developments related to manufacturing or using our vaccines;
. the price of our vaccines relative to other products or competing
treatments;
. the effectiveness of our sales and marketing efforts and those of our
marketing partners;
. the perception by physicians and other members of the health care
community of the safety, efficacy and benefits of our vaccines compared
to those of competing products or therapies;
. the willingness of physicians to adopt a new treatment regimen; and
. unfavorable publicity concerning cancer vaccines.
10
<PAGE>
In addition, as a result of the trend towards managed health care in the United
States, as well as legislative proposals to reduce government insurance
programs, third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new drug
products. Even if Provenge and our other products obtain regulatory approval,
they may not achieve market acceptance of any significance. If any of our
products do not achieve market acceptance, we will likely lose our entire
investment in that product which may cause our stock price to decline.
If we are unable to protect our proprietary rights, we may not be able to
compete effectively or operate profitably.
Our success is dependent in part on obtaining, maintaining and enforcing our
patents and other proprietary rights and our ability to avoid infringing the
proprietary rights of others. The patent position of biotechnology and
pharmaceutical firms is highly uncertain and involves many complex legal and
technical issues. There is no clear policy involving the breadth of claims
allowed in patents or the degree of protection afforded under patents.
Accordingly, patent applications owned by or licensed to us may not result in
patents being issued. If issued, the patents may not give us an advantage over
competitors with similar technology.
We own or have licenses to numerous patents. However, the issuance of a
patent is not conclusive as to its validity or enforceability and it is
uncertain how much protection, if any, will be given to our patents if we
attempt to enforce them and they are challenged in court or in other
proceedings, such as oppositions, which may be brought in foreign jurisdictions
to challenge the validity of a patent. The validity or enforceability of a
patent after its issuance by the patent office can be challenged in litigation.
It is possible that our patents will be successfully challenged or be limited
in their coverage. Moreover, the cost of litigation to uphold the validity of
patents and to prevent infringement can be substantial. If the outcome of
litigation is adverse to us, third parties may be able to use our patented
invention without payment to us. Moreover, it is possible that our patents will
be infringed or successfully avoided through design innovation. To stop these
activities we may need to file a lawsuit. These lawsuits are expensive and
would consume time and other resources, even if we were successful in stopping
the violation of our patent rights. In addition, there is a risk that a court
would decide that our patents are not valid and that we do not have the right
to stop the other party from using the inventions. There is also the risk that,
even if the validity of our patents were upheld, a court would refuse to stop
the other party on the ground that its activities are not covered by, that is,
do not infringe, our patents.
In addition to the intellectual property rights described above, we also
rely on unpatented technology, trade secrets and confidential information.
Therefore, others may independently develop substantially equivalent
information and techniques or otherwise gain access to or disclose our
technology. We may not be able to effectively protect our rights in unpatented
technology, trade secrets and confidential information. We require each of our
employees, consultants and advisors to execute a confidentiality agreement at
the commencement of an employment or consulting relationship with us. However,
these agreements may not provide effective protection of our information or, in
the event of unauthorized use or disclosure, they may not provide adequate
remedies.
The use of our technologies could potentially conflict with the rights of
others.
There may be patent rights belonging to others that require us to alter our
products, pay licensing fees or cease activities. If our products conflict with
patent rights of others, third parties could bring legal actions against us
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. If these legal actions are successful, in addition to any
potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. We may not
prevail in any legal action and a required license under the patent may not be
available on acceptable terms or at all.
11
<PAGE>
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property rights.
The cost to us of any litigation or other proceeding relating to
intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs
of complex patent litigation because they have substantially greater
resources. Uncertainties resulting from the initiation and continuation of any
litigation could hinder our ability to continue our operations.
Should third parties file patent applications, or be issued patents
claiming technology also claimed by us in pending applications, we may be
required to participate in interference proceedings in the United States
Patent and Trademark Office to determine priority of invention. We may be
required to participate in interference proceedings involving our issued
patents and pending applications. An unfavorable outcome in an interference
proceeding could require us to cease using the technology or to license rights
from prevailing third parties. A prevailing party in that case may not offer
us a license on commercially acceptable terms.
Competition in our industry is intense and many of our competitors have
substantially greater managerial resources than we have.
Competition in the cancer vaccine, infectious disease, autoimmune disease
and allergy fields is intense and is accentuated by the rapid pace of
technological development. Research and discoveries by others may result in
breakthroughs which may render our products obsolete even before they generate
any revenue. There are products currently under development by others that
could compete with the products that we are developing. Many of our
competitors have substantially greater research and development capabilities
and manufacturing, marketing, financial and managerial resources than we do.
Our competitors may:
. develop safer or more effective immunotherapeutics and other therapeutic
products;
. reach the market more rapidly, reducing the potential sales of our
products; or
. establish superior proprietary positions.
We understand that companies, including AVI Biopharma, Inc., Cell Genesys,
Inc., NW Biotherapeutics, Inc. and Vical Incorporated may be developing
prostate cancer vaccines that could potentially compete with Provenge, if
Provenge is successfully developed.
We anticipate that we will face increased competition in the future as new
companies enter our markets and as scientific developments surrounding
immunotherapy and other cancer therapies continue to accelerate. If our
products receive marketing approval but cannot compete effectively in the
marketplace, our profitability and financial position would suffer.
We rely on third parties to perform a variety of functions and have limited
manufacturing and cell processing capabilities, which could limit our
ability to commercialize our products.
We rely in part on collaborators and other third parties to perform for us
or assist us with a variety of important functions, including research and
development, manufacturing and clinical trials management. We also license
from others technology to enhance or supplement our technologies. Our cancer
vaccines and other products have never been manufactured on a commercial
scale, and our products may not be capable of being manufactured at a cost or
in quantities necessary to make them commercially viable. We intend to rely on
third party contract manufacturers to produce large quantities of materials
needed for clinical trials and product commercialization. Third party
manufacturers may not be able to meet our needs with respect to timing,
quantity or quality. If we are unable to contract for a sufficient supply of
needed materials on acceptable terms, or if we should encounter delays or
difficulties in our relationships with manufacturers, our clinical testing may
be delayed, thereby delaying the submission of products for regulatory
approval or the market introduction and subsequent sales of our products. Any
such delay may lower our revenues and potential profitability.
Moreover, we and any third-party manufacturers that we may use must
continually adhere to current Good Manufacturing Practices, or cGMP,
regulations enforced by the FDA through its facilities inspection program.
12
<PAGE>
If our facilities or the facilities of these manufacturers cannot pass a pre-
approval plant inspection, the FDA premarket approval of our vaccines will not
be granted. In complying with cGMP and foreign regulatory requirements, we and
any of our third-party manufacturers will be obligated to expend time, money
and effort in production, record-keeping and quality control to assure that our
products meet applicable specifications and other requirements. If we or any of
our third-party manufacturers fail to comply with these requirements, we may be
subject to regulatory action.
We have constructed two facilities for cell processing, the manufacture of
antigens and final formulation of our cancer vaccines. We also use three,
third-party cell processing centers. These five facilities may not be
sufficient to meet our initial needs for our prostate and multiple myeloma
clinical trials. Additionally, if we decide to manufacture our products in
commercial quantities ourselves, we will require substantial additional funds
and will be required to hire and train significant numbers of employees,
construct additional facilities and comply with applicable regulations for
these facilities, which are extensive. We may not be able to develop production
facilities that both meet regulatory requirements and are sufficient for all
clinical trials or commercial use.
If we lose or are unable to secure collaborators, or if our collaborators,
including Kirin, do not apply adequate resources to their collaboration with
us, our product development and potential for profitability may suffer.
We intend to enter into collaborations for one or more of the research,
development, manufacturing, marketing and other commercialization activities
relating to some of our products under development. We have entered into a
collaboration with Kirin relating to the development and commercialization of
our products based on our dendritic cell technologies in Asia. As our
collaborator, Kirin funds testing, makes regulatory filings and may manufacture
and market our products in Asia. The amount and timing of resources applied by
Kirin or other potential collaborators to our joint efforts are not within our
control.
If any collaborator breaches or terminates its agreement with us, or fails
to conduct its collaborative activities in a timely manner, the
commercialization of our products under development could be slowed down or
blocked completely. It is possible that Kirin or other potential collaborators
will change their strategic focus, pursue alternative technologies or develop
alternative products, either on their own or in collaboration with others, as a
means for developing treatments for the diseases targeted by our collaborative
programs. Our revenues and earnings also will be affected by the effectiveness
of our collaborators in marketing our products.
Our collaborations with Kirin may not continue or be successful and we may
not receive any further research funding, milestone or royalty payments. We
intend to continue to enter into new collaborative agreements in the future.
However, we may not be able to successfully negotiate any additional
collaborative arrangements. If established, these relationships may not be
scientifically or commercially successful. Any additional collaborations would
likely subject us to some or all of the risks described above with respect to
our collaboration with Kirin. Disputes may arise between us and Kirin, and
other potential collaborators, as to a variety of matters, including financial
or other obligations under our agreements. These disputes may be both expensive
and time-consuming and may result in delays in the development and
commercialization of products.
We are dependent on single-source vendors for some of our components.
We currently depend on single-source vendors for some components of our cell
separation devices and buoyant density solution, including sterilization and
packaging. There are, in general, relatively few alternative sources of supply
for these products. While these vendors have produced our products with
acceptable quality, quantity and cost in the past, they may be unable or
unwilling to meet our future demands. Establishing additional or replacement
suppliers for these products could take a substantial amount of time. If we
have to switch to a replacement vendor, the manufacture and delivery of our
products could be interrupted for an extended period.
13
<PAGE>
We deal with hazardous materials and must comply with environmental laws
and regulations, which can be expensive and restrict how we do business.
Our research and development work and manufacturing processes involve the
use of hazardous, infectious and radioactive materials. We are subject to
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of these materials and waste products. Despite
precautionary procedures that we implement for handling and disposing of these
materials, the risk of accidental contamination or injury cannot be
eliminated. In the event of a hazardous waste spill or other accident, we
could be liable for damages, penalties or other forms of censure. Although we
believe that we are in compliance in all material respects with applicable
environmental laws and regulations, we may be required to incur significant
costs to comply with environmental laws and regulations in the future.
We may experience difficulties managing our growth.
We expect significant growth in all areas of our operations as we develop
and market our products. We will need to add personnel and expand our
capabilities, which may strain our existing managerial, operational, financial
and other resources. To compete effectively and manage our growth, we must:
. train, manage and motivate a growing employee base;
. accurately forecast demand for our products; and
. expand existing operational, financial and management information
systems.
Our failure to manage our growth effectively could harm our business.
If we lose key management and scientific personnel or cannot recruit
qualified employees, our business could suffer.
Our success depends, to a significant extent, upon the efforts and
abilities of Christopher S. Henney, Ph.D., D.Sc., our President and Chief
Executive Officer, and David Urdal, Ph.D., our Executive Vice President and
Chief Scientific Officer, and other members of senior management. The loss of
the services of one or more of our key employees could adversely effect us. We
do not maintain key person life insurance on any of our officers, employees or
consultants.
Competition for qualified employees among companies in the biotechnology
and biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our products successfully, we may be required to expand
substantially our workforce, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and sales
and marketing. We may not be successful in hiring or retaining qualified
personnel.
We are exposed to potential product liability claims, and insurance against
these claims may not be available to us at a reasonable rate in the future.
Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. We have clinical trial coverage and we intend to obtain product
liability coverage in the future. However, insurance coverage may not be
available to us at an acceptable cost, if at all. We may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise. Regardless of merit or eventual outcome, product liability claims may
result in decreased demand for a product, injury to our reputation, withdrawal
of clinical trial volunteers and loss of revenues. Thus, whether or not we are
insured, a product liability claim or product recall may result in losses that
could be material.
14
<PAGE>
Risks Relating To This Offering
You may not be able to trade our common stock at or above your purchase
price.
Prior to this offering, there has not been a public market for our common
stock. The public offering price, determined by negotiations between us and
the representatives of the underwriters, is not necessarily indicative of the
market price at which our common stock will trade after this offering. You may
not be able to resell your shares at or above the initial public offering
price.
Market volatility may affect our stock price and the value of your
investment may be subject to sudden decreases.
The trading price for our common stock may be highly volatile. The price at
which our common stock will trade depends upon a number of factors, including
our historical and anticipated operating results and general market and
economic conditions, some of which are beyond our control. Factors such as
fluctuations in our financial and operating results, the results of
preclinical and clinical trials, announcements of technological innovations or
new commercial products by us or our competitors, developments concerning
proprietary rights and publicity regarding actual or potential performance of
products under development by us or our competitors could also cause the
market price of our common stock to fluctuate substantially. In addition, the
stock market has from time to time experienced extreme price and volume
fluctuations. These broad market fluctuations may lower the market price of
our common stock. Moreover, during periods of stock market price volatility,
share prices of many biotechnology companies have often fluctuated in a manner
not necessarily related to the companies' operating performance. Accordingly,
our common stock may be subject to greater price volatility than the stock
market as a whole.
Future sales of our common or preferred stock may lower the market price of
our common stock.
Sales of a substantial number of shares of our common stock or preferred
stock in the public market following this offering or the perception that such
sales could occur could cause the market price of our common stock to decline
or limit our future ability to raise capital through an offering of equity
securities. The number of shares of common stock available for sale by our
existing stockholders in the public market is limited by restrictions under
federal securities law and under lock-up agreements that our stockholders have
entered into with the underwriters and with us. Our officers, directors and
substantially all of our stockholders have entered into lock-up agreements
pursuant to which they have agreed not to offer or sell any shares of common
stock or any securities convertible into or exchangeable or exercisable for
any shares of common stock for a period of 180 days after the date of this
prospectus, without the prior written consent of Prudential Securities
Incorporated on behalf of the underwriters. Prudential Securities Incorporated
may, at any time and without notice waive any of the terms of these lock-up
agreements.
The following table indicates approximately when the shares of our common
stock that are not being sold in the offering but which were outstanding as of
March 31, 2000 will be eligible for sale into the public market, except for
174,311 shares eligible for resale on the date of this prospectus:
<TABLE>
<CAPTION>
Number of Shares Date of Eligibility for Resale into Public Market
---------------- -------------------------------------------------
<C> <S>
14,564,749 180 days after the date of this prospectus due to lock-up
agreements substantially all of our stockholders have
entered into with Prudential Securities Incorporated (in
the case of 14,474,118 shares) or with us (in the case of
90,631 shares).
1,132,480 Between 180 and 365 days after the date of this prospectus
due to requirements of the federal securities laws.
</TABLE>
15
<PAGE>
If you purchase our common stock in this offering, you will incur immediate
and substantial dilution in the book value of your shares.
You will experience an immediate and substantial dilution of $9.85 per
share in the net tangible book value per share of our common stock relative to
the initial public offering price. Assuming an initial public offering price
of $13.00 per share of common stock, our pro forma net tangible book value as
of March 31, 2000, after giving effect to this offering and the concurrent
private placement, would be $3.15 per share. In addition, this dilution will
be increased to the extent that holders of outstanding options and warrants to
purchase our common stock at prices below our net tangible book value per
share after this offering exercise such options or warrants.
It may be difficult for a third party to acquire us even if doing so would
be beneficial to our stockholders.
Provisions of our certificate of incorporation and bylaws may make it more
difficult for a third party to acquire us and could discourage a third party
from acquiring us at a premium price. For example, our certificate of
incorporation authorizes our board of directors to issue up to 10,000,000
shares of preferred stock and to fix the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
common stock will be subject to, and may be harmed by, the rights of the
holders of any preferred stock that may be issued in the future. The issuance
of preferred stock could reduce the voting power of the holders of our common
stock and the likelihood that common stockholders will receive payments upon
liquidation. We are also subject to provisions of Delaware law that could have
the effect of delaying, deferring or preventing a change in control of our
company. One of these provisions prevents us from engaging in a business
combination with any interested stockholder for a period of three years from
the date the person became an interested stockholder, unless specified
conditions are satisfied. These and other impediments to a third-party
acquisition or change of control could limit the price investors are willing
to pay in the future for shares of our common stock.
Executive officers, directors and principal stockholders will continue to
have substantial control over us after the offering, which could delay or
prevent a change in our corporate control favored by our other
stockholders.
Following this offering, executive officers, directors and principal
stockholders will beneficially own 47.3% of our outstanding common stock or
45.8% if the underwriters' over-allotment option is exercised in full.
Accordingly, these stockholders, individually and as a group, may be able to
control us and direct our officers and business, including any determination
with respect to a change in control, future issuances of our common stock or
other securities, declarations of dividends on the common stock and the
election of our board of directors.
Our management will have broad discretion in allocating the net proceeds
from this offering, which may not be used effectively.
We intend to use the net proceeds of this offering to fund clinical trials,
research, preclinical development, and commercialization activities for our
therapeutic vaccine products, including working capital and for general
corporate purposes. We may also use a portion of the net proceeds to increase
our vaccine production capabilities or to acquire complementary technologies
or products. Accordingly, our management will retain broad discretion as to
the allocation of most of the proceeds of this offering. The failure of
management to apply these funds effectively could negatively impact our
business and prospects.
16
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of
risks, uncertainties and assumptions about Dendreon, including, among other
things:
. General economic and business conditions, both nationally and in our
markets;
. Our expectations and estimates concerning future financial performance
and financing plans;
. The impact of competition and technological change;
. Our relationships with our corporate collaborators;
. Our ability to enter into future collaboration agreements;
. Our ability to achieve positive results in clinical trials;
. Our ability to develop safe and efficacious vaccines;
. Anticipated trends in our business;
. Existing and future regulations affecting our business; and
. Other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to Dendreon, our business or our management, are
intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-
looking statements.
While the provisions of Section 27A of the Securities Act, including the
protections provided by Section 27A to persons making forward-looking
statements, may not apply to forward-looking statements in this document, this
caution nevertheless is intended to highlight the risks, uncertainties and
assumptions inherent in discussing future events and trends so that potential
investors are put on advance notice of them.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information contained in
this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
17
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of common stock in this
offering will be approximately $52.9 million, or $61.1 million if the
underwriters exercise their over-allotment option in full, assuming an initial
public offering price of $13.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses.
We intend to use the net proceeds of this offering, together with the $5.0
million to be received from Kirin's investment in our common stock, to fund
clinical trials, research, preclinical and commercialization activities for our
therapeutic vaccines, to increase our dendritic cell processing or antigen
manufacturing capacity and for general corporate purposes, including working
capital. We may also use a portion of the net proceeds to acquire complementary
technologies or products. We have not determined the amount of net proceeds
that we will use for each of these purposes.
We have discussions on an ongoing basis regarding potential acquisitions and
licensing opportunities that are complementary to our business. Although we may
use a portion of the net proceeds for this purpose, we currently have no
agreements or commitments in this regard. We reserve the right, at the sole
discretion of our board of directors, to reallocate our use of proceeds in
response to these and other factors.
Pending such uses, we may invest the net proceeds temporarily in short-term,
investment-grade, interest-bearing securities or guaranteed obligations of
United States government.
DIVIDEND POLICY
We have not declared or paid and do not anticipate declaring or paying any
dividends on our common stock in the foreseeable future. Any future
determination as to the declaration and payment of dividends will be at the
discretion of our board of directors and will depend on then existing
conditions, including our financial condition, result of operations,
contractual restrictions, capital requirements, business prospects, and any
other factors our board of directors deems relevant.
18
<PAGE>
DILUTION
Purchasers of our common stock in this offering will experience immediate
and substantial dilution in the pro forma net tangible book value of our common
stock from the initial public offering price. Pro forma net tangible book value
per share represents the amount of our total tangible assets less our total
liabilities, divided by the number of our shares of common stock outstanding
and assumes the conversion of all outstanding shares of preferred stock into
14,386,945 shares of common stock effective immediately prior to the closing of
this offering. As of March 31, 2000, we had a pro forma net tangible book value
of $7.5 million, or $0.47 per share of common stock. After giving effect to the
sale of 4,500,000 shares of common stock offered by us at an assumed initial
public offering price of $13.00 per share and after the deduction of
underwriting discounts and commissions and estimated offering expenses payable
by us, and to the sale of 384,615 shares of common stock to Kirin at the
assumed initial public offering price, in a private placement concurrent with
the completion of this offering, our pro forma net tangible book value as of
March 31, 2000 would have been $65.4 million, or $3.15 per share. This
represents an immediate increase in the pro forma net tangible book value of
$2.68 per share to existing stockholders and an immediate and substantial
dilution of $9.85 per share to new investors purchasing common stock in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................... $13.00
------
Pro forma net tangible book value as of March 31, 2000...... $0.47
Increase attributable to new investors in the offering and
the concurrent private placement .......................... 2.68
-----
Pro forma net tangible book value after this offering and the
concurrent private placement................................. 3.15
------
Dilution in pro forma net tangible book value to new
investors.................................................... $ 9.85
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 2000,
the differences between existing stockholders, Kirin's investment in the
concurrent private placement, and new investors in this offering with respect
to the number of shares of common stock purchased from us, the total
consideration paid to us and the average consideration paid per share, before
the deduction of underwriting discounts and commissions and estimated offering
expenses payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 15,871,540 76% $ 59,150,000 48% $ 3.73
Kirin Brewery Co., Ltd. ..... 384,615 2 5,000,000 4 13.00
New investors................ 4,500,000 22 58,500,000 48 13.00
---------- --- ------------ ---
Total...................... 20,756,155 100% $122,650,000 100%
========== === ============ ===
</TABLE>
This discussion and tables above are as of March 31, 2000 and exclude:
. 1,929,263 shares of common stock issuable on exercise of outstanding
stock options at a weighted average exercise price of $1.04 per share;
and
. 532,543 shares of common stock issuable on exercise of warrants at a
weighted average exercise price of $3.72 per share.
The issuance of common stock in connection with the exercise of these
options and warrants will result in further dilution to new investors. See
"Management--Employee Benefit Plans" and Note 6 of the notes to financial
statements.
19
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
. on an actual basis;
. on a pro forma basis to reflect the conversion of all outstanding shares
of convertible preferred stock into 14,386,945 shares of common stock
and the change in the authorized number of shares upon the completion of
this offering; and
. on a pro forma as adjusted basis to reflect the receipt of the net
proceeds from the sale of 4,500,000 shares of common stock in this
offering at an assumed initial public offering price of $13.00 per
share, after deducting underwriting discounts and commissions and our
estimated offering expenses, and the sale of 384,615 shares of common
stock to Kirin, at the assumed initial public offering price, in a
private placement concurrent with the completion of this offering.
<TABLE>
<CAPTION>
March 31, 2000
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments................................... $ 14,265 $ 14,265 $72,170
======== ======== =======
Long-term obligations, less current portion.... $ 2,495 $ 2,495 $ 2,495
Stockholders' equity:
Preferred stock, $.001 par value, 13,722,936
shares authorized, actual; 10,000,000 shares
authorized pro forma and pro forma as
adjusted; 13,079,077 shares issued and
outstanding, actual; no shares issued or
outstanding, pro forma and pro forma as
adjusted.................................... 13 -- --
Common stock, $.001 par value, 19,910,000
shares authorized, actual; 80,000,000 shares
authorized pro forma and pro forma as
adjusted; 1,484,595 shares issued and
outstanding, actual; 15,871,540 shares
issued and outstanding, pro forma;
20,756,155 shares issued and outstanding,
pro forma as adjusted....................... 1 16 21
Additional paid-in capital................... 65,898 65,896 123,796
Deferred stock-based compensation............ (3,893) (3,893) (3,893)
Accumulated deficit.......................... (54,496) (54,496) (54,496)
-------- -------- -------
Total stockholders' equity..................... 7,523 7,523 65,428
-------- -------- -------
Total capitalization........................... $ 10,018 $ 10,018 $67,923
======== ======== =======
</TABLE>
The outstanding share information in the table is as of March 31, 2000 and
excludes:
. 1,254,595 shares of common stock available for future issuance under our
equity incentive plans and 1,929,263 shares of common stock issuable on
exercise of outstanding stock options at a weighted average exercise
price of $1.04 per share;
. 1,485,000 shares reserved for issuance under our 2000 Employee Stock
Purchase Plan; and
. 532,543 shares of common stock issuable on exercise of warrants at a
weighted average exercise price of $3.72 per share.
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our financial statements and the related notes appearing
elsewhere in this prospectus. The statement of operations data set forth below
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 audited financial
statements included elsewhere in this prospectus, which have been audited by
Ernst & Young LLP, independent auditors. 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 our audited financial
statements not included in this prospectus, which have been audited by Ernst &
Young LLP, independent auditors. The statement of operations data for the three
months ended March 31, 1999 and 2000 and the balance sheet data as of March 31,
2000 have been derived from unaudited financial statements included in this
prospectus. The unaudited financial statements have been prepared on
substantially the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the information contained in them. The historical
results do not necessarily indicate the results you should expect in any future
period and the results in interim periods are not necessarily indicative of
results that may be expected for the entire year.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
----------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------- -------- -------- -------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Total revenue........... $ 641 $ 474 $ 793 $ 1,849 $ 3,519 $ 636 $ 1,131
Operating expenses:
Research and
development.......... 4,082 5,093 5,290 8,064 10,222 2,615 3,519
General and
administrative....... 1,749 2,209 2,894 2,893 6,110 1,250 1,386
------- -------- -------- -------- -------- ------- -------
Total operating
expenses............... 5,831 7,302 8,184 10,957 16,332 3,865 4,905
------- -------- -------- -------- -------- ------- -------
Loss from operations.... (5,190) (6,828) (7,391) (9,108) (12,813) (3,229) (3,774)
Interest income......... 17 226 267 361 414 90 218
Interest expense........ (898) (114) (47) (41) (351) (25) (156)
Other income (loss),
net.................... -- -- 8 (2) 32 -- --
------- -------- -------- -------- -------- ------- -------
Interest and other
income (expense), net.. (881) 112 228 318 95 65 62
------- -------- -------- -------- -------- ------- -------
Loss before income
taxes.................. (6,071) (6,716) (7,163) (8,790) (12,718) (3,164) (3,712)
Provision for income
taxes.................. -- -- -- 600 -- -- --
------- -------- -------- -------- -------- ------- -------
Net loss................ (6,071) (6,716) (7,163) (9,390) (12,718) (3,164) (3,712)
Deemed dividend upon
issuance of convertible
preferred stock........ -- -- -- -- (285) -- (4,110)
------- -------- -------- -------- -------- ------- -------
Net loss attributable to
common stockholders.... $(6,071) $ (6,716) $ (7,163) $ (9,390) $(13,003) $(3,164) $(7,822)
======= ======== ======== ======== ======== ======= =======
Basic and diluted net
loss per common share.. $(58.03) $ (58.47) $ (21.37) $ (14.92) $ (13.75) $ (4.46) $ (6.13)
======= ======== ======== ======== ======== ======= =======
Shares used in
computation of basic
and diluted net loss
per common share....... 105 115 335 630 946 709 1,275
======= ======== ======== ======== ======== ======= =======
Pro forma basic and
diluted net loss per
share.................. $ (1.09) $ (0.51)
======== =======
Pro forma shares used in
computation of basic
and diluted net loss
per share (1).......... 11,963 15,306
======== =======
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------- March 31,
1995 1996 1997 1998 1999 2000
------- ------ ------ ------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and
short-term investments...... $ 116 $3,397 $8,223 $ 9,930 $13,813 $14,265
Working capital.............. (4,711) 2,692 7,471 6,665 9,938 10,220
Total assets................. 1,429 4,840 9,910 12,038 17,375 18,965
Long-term obligations, less
current portion............. 496 171 -- 531 2,799 2,495
Total stockholders' equity
(deficit)................... (4,209) 3,598 8,306 3,762 6,352 7,523
</TABLE>
- --------
(1) See Note 8 of notes to financial statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the accompanying financial statements and the
related notes appearing elsewhere in this prospectus.
Overview
Since our inception in 1992, our activities have primarily been associated
with the development and testing of our cancer vaccines. Our business
activities have included:
. product research and development;
. development of our proprietary cell separation technology;
. development of our proprietary Antigen Delivery Cassette technology;
. regulatory and clinical affairs;
. establishing manufacturing capabilities; and
. intellectual property prosecution.
We have incurred significant losses since our inception. As of March 31,
2000, our accumulated deficit was $54.5 million. We have recognized revenues of
$8.4 million since inception. We have incurred net losses since inception as a
result of research and development and general and administrative expenses in
support of our operations. We anticipate incurring net losses over at least the
next several years as we complete our clinical trials, apply for regulatory
approvals, continue development of our technology and expand our operations.
Kirin is our collaborator for the marketing and development of our vaccines
in Asia. Under our agreements with Kirin, we have received $8.5 million in
license fees, option fees and funding to support our collaborative research
efforts, of which we have recognized $4.7 million through March 31, 2000.
Results of Operations
Three Months Ended March 31, 2000 and 1999
Revenue. Revenue increased approximately 78%, from $636,000 for the three
months ended March 31, 1999 to $1.1 million for the three months ended March
31, 2000. Revenue for the three months ended March 31, 1999 consisted of
$612,000 from collaborative and license agreements and $24,000 from grant
revenue. Revenue for the three months ended March 31, 2000 consisted of
$928,000 from collaborative and license agreements and $203,000 from grant
revenue. The period over period increase was primarily due to $338,000
recognized as revenue from Kirin under a research and development agreement we
entered into with Kirin in 1999 and $179,000 of increased grant revenue.
Research and Development Expenses. Research and development expenses
increased approximately 35%, from $2.6 million for the three months ended March
31, 1999 to $3.5 million for the three months ended March 31, 2000. The
increase of $904,000 in research and development expenses resulted primarily
from a $504,000 increase in supplies, $244,000 in non-cash stock-based
compensation, and $161,000 in product development costs. Our research and
development expenses consist primarily of salaries and other personnel related
costs, product development expenses, facility costs, supplies and depreciation.
General and Administrative Expenses. General and administrative expenses
increased approximately 11%, from $1.3 million for the three months ended March
31, 1999 to $1.4 million for the three months ended March 31, 2000. The
increase in general and administrative expenses was due primarily to a $159,000
increase in non-cash based stock compensation. Our general and administrative
expenses consist primarily of personnel costs for finance, human resources,
business development, legal, facilities, information technologies and general
management, as well as facility costs and professional fees, such as legal and
accounting.
22
<PAGE>
Interest Income. Interest income increased approximately 142%, from $90,000
for the three months ended March 31, 1999 to $218,000 for the three months
ended March 31, 2000. This was attributable to higher average balances of cash,
cash equivalents and short-term investments.
Interest Expense. Interest expense increased approximately 524%, from
$25,000 for the three months ended March 31, 1999 to $156,000 for the three
months ended March 31, 2000. This was attributable to interest expense
associated with a loan we obtained in June 1999.
Years Ended December 31, 1999 and 1998
Revenue. Revenue increased approximately 90%, from $1.8 million in 1998 to
$3.5 million in 1999. Revenue in 1998 consisted of $1.6 million from
collaborative and license agreements and $237,000 of grant revenue. The year to
year increase was primarily due to $1.9 million in revenue related to a
research and development agreement we entered into with Kirin in 1999. Revenue
in 1999 consisted of $3.3 million from collaborative and license agreements and
$261,000 of grant revenue.
Research and Development Expenses. Research and development expenses
increased approximately 27%, from $8.1 million in 1998 to $10.2 million in
1999. Of the $2.1 million increase in research and development expenses from
1998 to 1999, $1.9 million was due to facilities and depreciation expense,
$397,000 was due to non-cash stock-based compensation, $280,000 was due to
supplies and $112,000 was due to product development expenses, including fees
paid to third parties associated with conducting clinical trials offset by a
decrease in salaries and personnel related costs of $469,000.
General and Administrative Expenses. General and administrative expenses
increased approximately 111%, from $2.9 million in 1998 to $6.1 million in
1999. Of the $3.2 million increase in general and administrative expenses from
1998 to 1999, $1.3 million was due to facilities and depreciation expenses,
$1.1 million was due to salaries and other personnel related expenses, $523,000
was due to professional fees and $341,000 was due to non-cash based stock
compensation.
Interest Income. Interest income increased approximately 15%, from $361,000
in 1998 to $414,000 in 1999. This was attributable to higher average balances
of cash, cash equivalents and short-term investments.
Interest Expense. Interest expense increased approximately 756%, from
$41,000 in 1998 to $351,000 in 1999. This was attributable to interest expense
associated with a loan we obtained in June 1999.
Income Tax Expense. Income tax expense was $600,000 in 1998 and relates to a
withholding tax assessed by Japan on certain payments received from Kirin. Due
to operating losses and the inability to recognize the benefits therefrom,
there was no provision for income taxes in 1999.
Years Ended December 31, 1998 and 1997
Revenue. Revenue increased approximately 133% from $793,000 in 1997 to $1.8
million in 1998. This increase was due to $1.0 million received from Kirin.
Research and Development Expenses. Research and development expenses
increased approximately 52%, from $5.3 million in 1997 to $8.1 million in 1998.
Of the $2.8 million increase in research and development expenses from 1997 to
1998, $1.8 million was due to salaries and other personnel related costs,
$429,000 was due to product development expenses, including fees paid to third
parties associated with conducting clinical trials, $110,000 was due facilities
and depreciation expenses and $97,000 was due to non-cash stock-based
compensation.
General and Administrative Expenses. General and administrative expenses
were $2.9 million in 1997 and 1998.
23
<PAGE>
Interest Income. Interest income increased approximately 35%, from $267,000
in 1997 to $361,000 in 1998. This was attributable to higher average balances
of cash, cash equivalents and short-term investments.
Interest Expense. Interest expense decreased approximately 13%, from $47,000
in 1997 to $41,000 in 1998.
Income Tax Expense. Income tax expense was $600,000 in 1998 and relates to a
withholding tax assessed by Japan on certain payments received from Kirin. Due
to operating losses and the inability to recognize the benefits therefrom,
there was no provision for income taxes in 1999.
Revenue Recognition
We recognize revenue from research and development collaboration agreements
as earned upon achievement of the performance requirements of the agreements.
Payments that are received related to future performance are deferred and
recognized as revenue as the performance requirements are achieved. Non-
refundable, upfront payments received in connection with collaborative research
and development agreements are deferred and recognized on a straight-line basis
over the relevant periods specified in the agreement, generally the research
term. Revenue related to grant agreements is recognized as related research and
development expenses are incurred. As of March 31, 2000, we had deferred
revenues of approximately $4.9 million.
Net Operating Loss Carryforwards
At December 31, 1999, we had net operating loss carryforwards of
approximately $28.5 million to offset any future federal and state taxable
income. If not utilized, the tax net operating loss carryforwards will expire
at various dates beginning in 2009 through 2012. We also had research and
development tax credit carryforwards at December 31, 1999, of approximately
$1.2 million for federal income tax purposes. Utilization of the net operating
losses and credits may be subject to a substantial annual limitation due to the
change in the ownership provisions of the Internal Revenue Code of 1986, as
amended, and similar state provisions. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
Stock-Based Compensation Expense
Stock-based compensation expense consists of the amortization of deferred
stock-based compensation resulting from the grant of stock options at exercise
prices subsequently deemed to be less than the fair value of the common stock
on the grant date. We recorded total deferred stock-based compensation of
$589,000 in 1998, $2.1 million in 1999 and $2.8 million for the three months
ended March 31, 2000. These amounts were initially recorded as a component of
stockholders' equity and are being amortized by charges to operations over the
vesting period of the options using the graded vesting method. We recorded
amortization of deferred stock-based compensation of $149,000 in 1998, $844,000
in 1999 and $581,000 for the three months ended March 31, 2000. Including the
deferred stock-based compensation associated with options granted during the
three months ended March 31, 2000, amortization of deferred stock-based
compensation expense is expected to be $2.3 million in 2000, $1.3 million in
2001, $653,000 in 2002, and $229,000 in 2003 and $5,000 in 2004.
Deemed Dividend Upon Issuance of Convertible Preferred Stock
We recorded a deemed dividend of $285,000 in 1999 and $4.1 million for the
three months ended March 31, 2000 for the issuance of Series E convertible
preferred stock. The incremental fair value determined on the date of issuance
for each closing of Series E convertible preferred stock is deemed to be the
equivalent of a preferred stock dividend. We recorded the deemed dividend at
the date of issuance by offsetting charges and credits to additional paid-in
capital, without any effect on total stockholders' equity. The amount increased
the loss attributable to common stockholders in the calculation of basic net
loss per share for 1999.
24
<PAGE>
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments were $14.3 million at
March 31, 2000. We have financed our operations since inception through the
private placement of equity securities, revenue from collaborative
arrangements, grant revenue, interest income earned on cash and cash
equivalents, equipment lease line financings and loan facilities. Since January
1, 2000, we received net proceeds of $4.1 million from private financing
activities. In 1999, we received net proceeds of $13.1 million from private
financing activities. In 1998, we received net proceeds of $4.7 million from
private financing activities. To date, inflation has not had a material effect
on our business.
Since our inception, investing activities, other than purchases and
maturities of short-term investments, have consisted primarily of purchases of
property and equipment. At March 31, 2000, our investment in equipment and
leasehold improvements was $4.0 million. We have an agreement with a financing
company under which we have financed purchases of $1.7 million of leasehold
improvements, laboratory, computer and office equipment. The lease terms are 48
months and bear interest at rates ranging from 10.8% to 12.0%. We also have a
tenant improvement allowance of $3.5 million from the lessor of our Seattle,
Washington facility. As of March 31, 2000, we had committed to the expenditure
of $2.5 million for laboratory and manufacturing space. The improvement
allowance bears interest at the rate of 12.5% and is repaid monthly over the
length of the original lease.
Net cash used in operating activities for the three months ended March 31,
2000 was $3.6 million. Net cash used in operating activities in 1999 was $12.1
million. Net cash used in operating activities in 1998 was $2.9 million. Our
collaborators paid us a total of $6.0 million in nonrefundable upfront license
fees in 1998, of which $5.7 million was deferred at December 31, 1998.
Expenditures in both periods were a result of increased research and
development expenses and general and administrative expenses in support of our
operations.
In June 1999, we obtained a loan in the amount of $3.0 million from a
financial lender. The loan bears interest at an annual rate of 13.3%. We made
monthly interest payments on this loan for six months and will make principal
and interest payments for 24 months thereafter.
Pursuant to our collaborative license agreement with Kirin, in March 2000 we
exercised our right to require Kirin to purchase $5.0 million of our common
stock. Accordingly, Kirin will purchase 384,615 shares of our common stock in a
private placement concurrent with the closing of this offering at the initial
public offering price.
We anticipate that the net proceeds from this offering, together with the
proceeds from Kirin, our cash on hand and cash generated from our collaborative
arrangements, will be sufficient to enable us to meet our anticipated
expenditures for at least the next 24 months, including, among other things:
. supporting our clinical trial efforts;
. continuing internal research and development;
. development of sales and marketing capabilities; and
. development of manufacturing capabilities.
However, we may need additional financing prior to that time. Additional
financing may not be available on favorable terms or at all. If we are unable
to raise additional funds when we need them, we may be required to delay,
reduce or eliminate some or all of our development programs and some or all of
our clinical trials. We also may be forced to license technologies to others
that we would prefer to develop internally.
25
<PAGE>
Year 2000 Compliance
The impact of the Year 2000 on our technology systems to date has been
insignificant. We have obtained documentation from third party vendors as to
their Year 2000 compliance testing and recommendations. To date, we have not
experienced any significant impact on our operations as a result of Year 2000
issues with our third party vendors. The total cost of our Year 2000
remediation effort has not been material and is not expected to be material in
future periods.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101). SAB 101 is based upon existing accounting rules and provided specific
guidance on how those accounting rules should be applied and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We have determined that SAB 101 will not have a material
impact on our financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for the year ending 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. We
believe the adoption of SFAS 133 will not have a material effect on our
financial statements, since we currently do not hold derivative instruments or
engage in hedging activities.
Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2000, we had short-term investments of $5.8 million. Our
short-term investments will decline by an immaterial amount if market interest
rates increase, and therefore, our exposure to interest rate changes has been
immaterial. Declines of interest rates over time will, however, reduce our
interest income from our short-term investments. Our outstanding bank loan and
capital lease obligations are all at fixed interest rates and therefore have
minimal exposure to changes in interest rates.
26
<PAGE>
BUSINESS
Overview
We discover and develop therapeutic vaccines that stimulate a patient's
immunity for the treatment of cancer. Our most advanced product candidate,
Provenge, is a therapeutic vaccine for the treatment of prostate cancer, and is
in Phase III clinical trials. We are also conducting Phase II clinical trials
for Mylovenge, our therapeutic vaccine for the treatment of multiple myeloma.
We have three additional therapeutic vaccines in preclinical development for
the treatment of common malignancies, including breast, colorectal, lung and
ovarian/uterine cancers. We combine our expertise in immunology and antigen
engineering, or modification, with our proprietary cell separation technologies
to develop therapeutic vaccines that stimulate cancer-fighting cells, a process
called cell-mediated immunity. We believe this is the key to eliminating
cancer. We also intend to pursue the application of our technologies in the
fields of autoimmune diseases, allergies and infectious diseases.
Industry Background
Prevalence of Cancer in the United States
The American Cancer Society estimates that doctors will diagnose
approximately 1.2 million new cases of cancer in the United States in 2000.
Cancer, the second leading cause of death in the United States, will result in
an estimated 552,000 deaths in 2000. Several of the most common cancers and
selected information regarding them are presented as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Type of Cancer Prevalence(1) New Cases(1) Deaths(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Breast................................. 1,081,000 184,000 41,000
Prostate............................... 1,002,000 180,000 32,000
Colorectal............................. 425,000 130,000 56,000
Lung................................... 187,000 164,000 157,000
B-cell Malignancies(2)................. N/A 76,000 39,000
Ovarian/Uterine........................ N/A 72,000 25,000
Bladder................................ N/A 53,000 12,000
Pancreatic............................. N/A 28,000 28,000
</TABLE>
- --------------------------------------------------------------------------------
(1) Projections for 2000 from the American Cancer Society and industry
sources for the United States.
(2) Cancers of the blood, known as B-cell malignancies, include multiple
myeloma, Non-Hodgkin lymphoma and Hodgkin's lymphoma.
N/A is not available.
Current Cancer Therapies
Cancer is characterized by abnormal cells that proliferate uncontrollably
and metastasize, or spread, throughout the body, producing deposits of tumor
cells, called metastases. These proliferating cells form masses called tumors.
As the tumors grow, they cause tissue and organ failure and ultimately death.
To be effective, therapy must eliminate the cancer both at its site of
origin and at sites of metastases. Metastatic disease is often responsible for
the relapse and ultimate death of patients with cancer. Current treatments for
cancer include surgery, radiation, hormone therapy and chemotherapy. Surgery
and radiation therapy treat cancer at its origin but are limited because
certain tissues cannot be removed surgically and/or do not tolerate radiation.
Moreover, cancers frequently spread prior to detection, and surgery and
radiation cannot control metastases. Chemotherapy and hormone therapy are used
to treat tumor metastases. However, these therapies cause severe damage to
normal tissue. Additionally, chemotherapy and hormone therapy may shrink tumors
but rarely eliminate them completely.
27
<PAGE>
Treatments known as immunotherapy stimulate the body's natural mechanism for
fighting disease and may overcome many of the limitations of current cancer
therapies. Immunotherapy may be particularly useful for the treatment of
residual disease.
The Immune System
Tumor Antigens. The immune system, the body's natural defense against
disease, is composed of a variety of specialized cells. These cells recognize
specific chemical structures, called antigens, that are found on disease-
causing agents. Antigens trigger an immune response, characterized by the
proliferation of immune system cells and the eventual removal of antigen from
the body.
Dendritic Cells. A specialized class of immune system cells, called
dendritic cells, starts the immune response. Dendritic cells bind and take up
antigen from their surroundings and process the antigen into fragments that are
recognized by specific classes of immune cells, called lymphocytes. During this
antigen processing, dendritic cells mature enabling them to present the
processed antigen to lymphocytes. Lymphocytes proliferate in response to their
interaction with dendritic cells and eliminate the disease-causing agent. There
are two main categories of lymphocytes: B-lymphocytes, or B-cells, and T-
lymphocytes, or T-cells. Each category of lymphocytes has a different role in
the immune response. T-cells combat disease by killing antigen bearing cells
directly. In this way, T-cells eliminate cancers and virally infected tissue.
T-cell immunity is also known as cell-mediated immunity and commonly is thought
to be the body's key defense against tumors and cells chronically infected by
viruses. In contrast, activation of B-cells leads to the production of specific
antibodies, which are primarily involved in preventing infectious disease.
Cancer Vaccines. The immune system recognizes and generates a strong
response to hundreds of thousands of different antigens introduced from the
environment. Tumors, however, frequently display antigens that are also found
on normal cells. Thus, the immune system may not distinguish between tumors and
normal cells and, therefore, may be unable to mount a strong anti-cancer
response. Tumors may also actively prevent dentritic cells from becoming
mature, thereby preventing full activation of the immune system. Thus, we
believe the key to directing the immune system to fight cancers is to modify,
or engineer, tumor antigens so that they are recognized by the immune system
and to manipulate dendritic cells to stimulate a vigorous cell-mediated
immunity.
Our Therapeutic Cancer Vaccine Approach
We combine our expertise in antigen identification, antigen engineering and
dendritic cell processing to produce immunotherapeutic vaccines. Our ability
both to manipulate dendritic cells and to engineer antigens allows us to
develop vaccines that are designed to generate effective cell-mediated immune
responses. We have vaccines in development for eight common cancers. Our
approach to therapeutic cancer vaccines is to:
. identify antigens on cancer cells which are suitable targets for cancer
therapy;
. create proprietary, genetically engineered, Antigen Delivery
Cassettes(TM) that will be optimally processed by dendritic cells;
. isolate and activate dendritic cells using proprietary methods; and
. create cancer vaccines that combine dendritic cells and engineered
antigens to trigger cell-mediated immunity to destroy tumors.
Antigen Identification
Our objective is to identify antigens associated with as broad a population
of cancers as possible. We obtain antigens from several sources: our internal
discovery programs, public databases of genetic information and licenses from
third parties. Our internal antigen discovery programs begin by identifying
novel genes expressed in specific tissues or in malignant cells. We then
evaluate the expression of these genes in normal
28
<PAGE>
versus diseased tissue. Genes that are found localized in diseased tissue are
considered candidates for antigen engineering. Likewise, genes from external
sources that meet these criteria are also considered. To date, we have
identified genes for 39 antigens that meet these criteria and have incorporated
five of these antigens into our therapeutic vaccines for eight common cancers.
Antigen Engineering
We engineer antigens to produce proprietary therapeutic vaccines for
multiple cancers as well as other diseases. Our antigen engineering is designed
to trigger and maximize cell-mediated immunity by augmenting the uptake and
processing of the target antigen by the dendritic cell. We can affect the
quality and quantity of the immune response that is generated by adding,
deleting or modifying selected sequences of the antigen gene, together with
inserting the modified antigen into our Antigen Delivery Cassette.
Our Antigen Delivery Cassette is a protein that has three regions: the
region that enhances antigen binding and entry into dendritic cells; the region
that directs antigen processing along specific pathways for T-cell activation;
and the antigen itself. The Antigen Delivery Cassette targets each engineered
antigen to dendritic cells and provides a common key to unlock the potential to
process antigen.
Image:
The title of the image is "Antigen Delivery Cassette". The image consists of
three regions labeled "Antigen," "Antigen Processing Region" and "Dendritic
Cell Binding Region."
The dendritic cell binding region is common to all of our Antigen Delivery
Cassettes and has the capability to recognize the dendritic cell and bind the
cassette to the dendritic cell surface. Binding stimulates the dendritic cell
to engulf the cassette. The antigen processing region then directs dendritic
cells to process antigen along pathways that stimulate cell-medicated immunity.
The antigen region of the Antigen Delivery Cassette thus gains access to
processing by the dendritic cell, which would otherwise be denied to
non-engineered antigen. We believe this process results in a potent cell-
mediated immune response.
Our Antigen Delivery Cassette technology provides us with a foundation on
which new proprietary antigens are built. We have synthesized Antigen Delivery
Cassettes for 14 different tumor targets and have identified more than 25
additional targets potentially suitable for engineering. An example of our
antigen engineering approach is the antigen HER2 used for production of
APC8024, our therapeutic vaccine for the treatment of breast, ovarian,
colorectal and pancreatic cancer. The gene encoding a protein called HER2 is
known to be associated with these cancers. Because HER2 is poorly recognized as
an antigen by the immune system, we created a series of Antigen Delivery
Cassettes, each with a distinct version of the modified HER2 gene sequence. We
then tested each of these cassettes in preclinical models and identified and
incorporated into our vaccine the one that generated the most potent cell-
mediated immune response and was most potent for treating cancer in animals.
Dendritic Cell Processing and Vaccine Production
Our vaccine manufacturing process incorporates two elements: the Antigen
Delivery Cassette and dendritic cells isolated from blood. To obtain dendritic
cells, we first remove white blood cells from a patient's blood through a
standard blood collection process called leukapheresis. Dendritic cells are
then separated from other
29
<PAGE>
white blood cells using our proprietary cell separation devices. Our process
separates dendritic cells from tumors, which may suppress dendritic cell
function, and thereby allows dendritic cells to become fully mature and
activated.
We incubate the dendritic cells with the appropriate Antigen Delivery
Cassette under controlled conditions in which we have optimized conditions,
including concentration of the Antigen Delivery Cassette and dendritic cell
numbers. After 40 hours, the dendritic cells are optimally activated and are
ready to be used as a vaccine. We subject each vaccine to quality control
testing, including purity, potency and sterility testing. Our process requires
less than three days from white blood cell collection to vaccine
administration.
Vaccine Delivery
Our vaccines are delivered as a 30-minute intravenous infusion given as an
outpatient procedure. A single vaccine infusion is sufficient to stimulate
cell-mediated immunity to the target antigen. Our clinical trials indicate that
maximum stimulation requires three infusions given at two-week intervals.
Patients in our trials typically complete a course of therapy in one month.
Benefits of Our Approach
Our therapeutic vaccine approach may offer novel treatment alternatives for
cancers that are inadequately addressed. Benefits of our therapeutic vaccines
may include:
. Vigorous stimulation of cell-mediated immunity: The results of our
clinical trials to date have demonstrated that our vaccines have the
potential to produce cell-mediated immunity, the body's key defense
against cancer. For example, in our Phase I and Phase II prostate cancer
trials, Provenge stimulated cell-mediated immunity in all 70 patients
tested. In these trials, we observed a significant correlation between
the strength of the cell-mediated immunity and clinical benefit.
. Minimal side effects: Our vaccines specifically target cancerous cells
and have been very well tolerated. In over 400 doses of our vaccines
given to 180 patients to date, less than two percent of the infusions
resulted in any significant side effects.
. Applicability to a wide variety of cancers: Our antigen identification,
antigen engineering and dendritic cell technologies enable us to create
proprietary vaccines for the potential treatment of a wide variety of
cancers. Our efforts to date have led to the identification of numerous
product candidates, including our five most advanced therapeutic
vaccines for the treatment of many common cancers.
. Single vaccine can treat multiple cancers: We identify novel antigens
that are shared by multiple types of cancer. We believe this approach
will allow us to develop single vaccines for the treatment of several
different tumors. For example, our vaccines target antigens common to
the following cancers:
<TABLE>
<CAPTION>
Our
Cancers Vaccines That Address Multiple Cancers
---------------------------------------------------------
APC8024 APC80NY APC80TR
--------------------------------------
<S> <C> <C> <C>
Breast X X X
Prostate X X X
Colorectal X X
Lung X X
Ovarian/Uterine X X
Bladder X
Pancreatic X
</TABLE>
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. Access broad patient population: We employ a single, well-characterized,
genetically engineered antigen for each therapeutic vaccine. We select
antigens that are present on a significant percentage of cancer patients'
tumors. For example, our prostate cancer vaccine antigen is found on
approximately 95% of prostate cancers. This approach eliminates the need
to extract an individual patient's tumor as a source of antigen. As a
result, we believe our vaccines are applicable to a broad patient
population.
. Cost-effective cGMP manufacturing process: We have developed a
manufacturing process that employs our proprietary cell separation
systems and produces vaccines on a cost-effective basis. We have
standardized processes that enable us to establish cGMP-compliant cell
processing facilities worldwide, which would be required for wide scale
adoption of our vaccines.
. Simple, convenient therapy: Our treatment protocol employs techniques
that are standard in blood banking and transfusion medicine. Patients
undergo routine white blood cell collection and subsequently receive our
vaccines through a 30-minute, out-patient infusion. Patients in our
trials typically complete a course of treatment in one month.
Strategy
Our goal is to become a leader in the development and commercialization of
therapeutic products that stimulate or heighten a patient's immunity for the
treatment of cancer, autoimmune diseases, allergies and infectious diseases.
Key elements of our strategy include the following:
Maximize Speed to Market of Lead Therapeutic Vaccine. We are focused on
bringing our prostate cancer vaccine, Provenge, to market. Considerable
corporate resources are devoted to the development of this vaccine.
Build a Large and Diverse Product Portfolio. Our internal development
efforts will continue to focus on utilizing our proprietary antigen
identification and engineering capabilities to expand our cancer vaccine and
therapeutic antibody product portfolio. In addition, we intend to accelerate
the development of a broader product portfolio by licensing or acquiring
complementary technologies, patents and product candidates.
Retain Key Commercialization Rights. We intend to retain commercialization
rights to our oncology products in the United States. Due to the concentrated
distribution channels for the United States oncology market, we plan to develop
a direct sales force to market our cancer vaccines in the United States.
Collaborate in Markets Outside of the United States. We believe
collaborations with established pharmaceutical companies will enable us to best
achieve the commercial potential of our products in markets outside the United
States, specifically in Asia and Europe. We have formed an alliance for the
Asian markets with Kirin, a significant marketer of immunological products in
Asia. Kirin has exclusive marketing rights in Asia for Provenge and Mylovenge,
as well as an option to acquire exclusive marketing rights in Asia for our
other dendritic cell products. We also intend to establish a strategic
collaboration for our products in Europe.
Extend Our Technologies into Autoimmune Diseases, Allergies and Infectious
Diseases. Our therapeutic vaccine technology has potential applications in
areas beyond cancer. We intend to pursue the application of our technologies in
the fields of autoimmune diseases, allergies and infectious diseases. In these
areas, we plan to establish strategic collaborations for clinical development
and commercialization.
Leverage Our Proprietary Technologies. To obtain value for our proprietary
cell separation technology beyond our areas of interest, we plan to enter into
arrangements that allow our technology to be used by others in exchange for
fees and royalties. To date, we have entered into agreements with
BioTransplant, Inc. and Osiris Therapeutics, Inc.
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Products
The following table summarizes the target indications and status of our
product development programs:
OUR PRODUCTS AND PRODUCTS IN DEVELOPMENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Product Target Indication(s) Status(1)
---------------------------- --------------------------------- -------------------------
<C> <S> <C>
Therapeutic Vaccine Products
Provenge(TM) Prostate cancer Phase III
Mylovenge(TM) Multiple myeloma Phase II
Amyloidosis
Other B-cell malignancies
APC8024 Breast cancer Preclinical; Phase I
Prostate cancer clinical
Colorectal cancer trials expected to
Ovarian/Uterine cancer commence in 2000
Pancreatic cancer
APC80NY Breast cancer Preclinical; Phase I
Prostate cancer clinical
Lung cancer trials expected to
Ovarian/Uterine cancer commence in 2001
Bladder cancer
APC80TR Breast cancer Preclinical
Prostate cancer
Colorectal cancer
Lung cancer
Therapeutic Antibody
Products
Danton(TM) Non-Hodgkin lymphoma Preclinical
Hodgkin's lymphoma
B-cell leukemias
Dantes(TM) Autoimmune diseases, including Preclinical
rheumatoid arthritis
Cell Separation Products
DACS(R)SC Kit Blood stem cell preparation for FDA Approved
transplantation
</TABLE>
(1) Preclinical means that a product is undergoing efficacy and safety
evaluation in disease models in preparation for human clinical trials.
Phase I-III clinical trials denote safety and efficacy tests in humans as
follows:
Phase I: Evaluation of safety and dosing.
Phase II: Evaluation of safety and efficacy.
Phase III: Larger scale evaluation of safety and efficacy.
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Therapeutic Vaccine Products
Provenge for Prostate Cancer
There is currently no treatment that improves long-term survival of patients
with metastatic prostate cancer. We have completed five Phase I and Phase II
clinical trials of Provenge in 78 patients with metastatic prostate cancer that
is resistant to hormone therapy, the standard treatment for this condition.
These trials suggest that Provenge is safe and may be effective in treating
these patients. We began two separate Phase III clinical trials of Provenge in
January 2000 and April 2000.
Vaccine Description. Provenge is being developed for treatment of prostate
cancer and is our most advanced vaccine product candidate. The antigen
component of Provenge is derived from the gene encoding a marker for prostate
cancer, prostatic acid phosphatase, which is found in approximately 95% of
prostate cancers. We have subjected prostatic acid phosphatase to our antigen
engineering process and have created a proprietary Antigen Delivery Cassette.
Target Market. Prostate cancer is the most common solid tumor malignancy in
men in the United States, with over one million currently diagnosed with the
disease. An estimated 180,000 new cases and 32,000 deaths in the United States
are expected in 2000, according to the American Cancer Society. The five-year
survival rate for patients with prostate cancer resistant to standard treatment
is less than 30%.
Current Treatment. Prostate cancer is treated initially with surgery or
radiation therapy, but a substantial percentage of patients will develop
metastases after local therapy with surgery or radiation. Hormone therapy is
standard treatment for metastatic prostate cancer and achieves temporary tumor
control or regression in approximately 80% to 85% of patients. However, hormone
therapy causes serious side effects, including impotence and osteoporosis. In
addition, within two years the cancer usually grows, a condition called hormone
refractory prostate cancer, or HRPC. Half of the patients with HRPC will die
within 12 to 18 months of the onset of HRPC. Currently, the only FDA approved
treatments for HRPC are chemotherapy and radiopharmaceuticals, which can
alleviate cancer-related symptoms but cause severe side effects and do not
prolong survival. Most men have no symptoms when first diagnosed with HRPC. We
believe there is a need for new treatments that control prostate cancer without
the side effects of current treatments.
Vaccine Development. We have initiated two double-blind, placebo-controlled
Phase III clinical trials that are designed to demonstrate that Provenge is
safe and effective for treating HRPC. The trials will determine if Provenge
delays disease progression and its associated pain. Patients are eligible for
the trials if they have HRPC and do not have cancer-related symptoms, such as
pain. We anticipate that the initial results from these trials will be
available by the end of 2001.
We treated 31 patients with Provenge in Phase I and Phase II clinical trials
that were performed in collaboration with clinical investigators at the
University of California, San Francisco. All patients had advanced prostate
cancer that was resistant to hormone therapy. Twelve of these patients were
treated in the Phase I dose ranging study. Nineteen patients participated in
the Phase II trial and received three infusions of Provenge, at a full
therapeutic dose. Based upon historical data, we would have expected that 50%
of untreated patients at a similar stage of disease as the 19 patients treated
in the Phase II trial would have experienced disease progression at 12 weeks,
75% at 30 weeks, and 90% at one year. In our trials, we observed a significant
decrease in the rate of progression of the disease. At 28 weeks, 10 patients,
or 53%, had stabilized; five patients, or 26%, were stable for greater than one
year. Among those patients experiencing side effects, the most common side
effects of the treatment were low grade fever and minor muscle aches. In
addition, less than two percent of Provenge infusions were associated with
clinically significant side effects. This trial suggests that Provenge is safe
and may be effective for the treatment of HRPC.
In a dose-ranging study, we treated 29 patients in sequential Phase I and
Phase II clinical trials that were performed in collaboration with clinical
investigators at the Mayo Clinic. This trial tested the effectiveness of two
doses of Provenge followed by injections of the prostate antigen alone for
treatment of men with HRPC.
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All patients had advanced prostate cancer and most had cancer-related pain
symptoms. Provenge treatment resulted in decreased levels of prostate specific
antigen, or PSA, a marker of disease status, in six of the 29 patients. One of
these patients had widespread metastases in his lymph nodes. After Provenge
treatment, this patient experienced a complete remission that has lasted for
more than 12 months. Most patients in this trial did not experience any side
effects from our treatment.
We are also performing a Phase I trial of different doses of Provenge for
the treatment of HRPC to support a regulatory filing in Asia. The trial is
being performed in collaboration with clinical investigators at the National
Cancer Center Hospital in Tokyo, Japan and investigators at Kirin. Treatment so
far has been shown to be safe, with low grade fevers being the only side
effect. One of the first four patients who have completed treatment has
experienced a partial remission, as evidenced by greater than 50% decrease in
tumor masses detected by computerized axial tomography, or CT scans.
In addition to the treatment of HRPC, based on our clinical trials to date,
we believe that Provenge may also be effective for treatment of earlier stage
patients who have a low number tumor cells. In 1999, we began a Phase II
clinical trial of Provenge for treatment of men with relapsed prostate cancer
who have not received hormone therapy. This trial, which is being performed at
University of California, San Francisco, is designed to assess the
effectiveness of Provenge for treatment of newly relapsed prostate cancer. A
second trial of Provenge will be designed to treat men with newly diagnosed
prostate cancer. These men will first undergo surgery to remove the tumor in
the prostate and then receive Provenge in an effort to eliminate residual
disease and metastases and thereby prevent recurrence. These two trials are
intended to provide further evidence of Provenge's effectiveness and, if
successfully completed, will be the basis for future Phase III trials that
would seek expanded labeling indications for this product, if approved.
Mylovenge for B-cell Malignancies: Multiple Myeloma and Amyloidosis
Existing therapies for multiple myeloma, a cancer of the blood, amyloidosis,
a complication of multiple myeloma, and other cancers of B-lymphocytes, or B-
cells, are usually not curative and cause severe side effects. We are
conducting two Phase II clinical trials of our therapeutic vaccine for multiple
myeloma and amyloidosis. In these trials, 31 of 58 patients with multiple
myeloma that was resistant to standard therapy benefitted from Mylovenge
therapy as demonstrated by major tumor reductions or disease stabilization for
six months or longer.
Vaccine Description. Mylovenge is our vaccine for treatment of multiple
myeloma, amyloidosis and other B-cell malignancies. In contrast to our other
vaccines, Mylovenge utilizes a patient-specific antigen, called M protein, a
unique immunoglobulin, or antibody, produced by a patient's tumor. We obtain M
protein by collecting a sample of a patient's blood.
Target Market. Multiple myeloma accounts for approximately 10% of cancers of
the blood. The American Cancer Society estimates that in 2000, 13,600
individuals in the United States will be diagnosed with multiple myeloma and
over 11,000 individuals will die from the disease. Amyloidosis is a disease
related to multiple myeloma, in which plasma cells produce an immunoglobulin
that accumulates in normal tissues including the heart, liver, kidneys and
nerves. The immunoglobulin deposits increase continually and eventually disrupt
normal organ functions, resulting in death from organ failure. Amyloidosis
afflicts approximately 2,500 individuals in the United States annually and is
fatal in most cases.
Current Treatment. Unlike most cancers that metastasize over time, multiple
myeloma is typically metastatic at the time of diagnosis. Chemotherapy is the
standard initial treatment for this disease. A number of chemotherapy drugs
cause a reduction in the volume of myeloma. However, standard doses of
chemotherapy rarely induce complete disappearance of myeloma even temporarily
and do not prolong survival. High dose chemotherapy with autologous stem cell
rescue, a type of bone marrow transplant, appears to prolong survival and is
rapidly becoming standard treatment. This approach, however, causes significant
adverse side effects and
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does not cure patients. We believe these patients, however, are excellent
candidates for immunotherapy because of low levels of residual cancer cells
located in the bone marrow.
Doctors treat amyloidosis with chemotherapy, but patients often have severe
side effects because of pre-existing organ damage due to the immunoglobulin
deposits. The goal of treatment is to stabilize the patient's condition, since
improvement of organ damage is rare even after aggressive therapy.
Vaccine Development. We are currently conducting a Phase II clinical trial
of Mylovenge, in collaboration with the Mayo Clinic, for treatment of patients
who have residual myeloma after high dose chemotherapy and stem cell
transplant. These patients have advanced resistant disease but have a low
number of tumor cells. M protein in the blood is used to monitor the patients'
condition--the lower the level of M protein, the lower the number of remaining
tumor cells. We plan to treat 30 patients in this trial and 15 have completed
treatment so far. Among the 15 patients, eight, or 53%, had major tumor
reductions. Four of these eight patients had complete disappearance of M
protein from the blood; the other four had a greater than 50% reduction. We
examined the bone marrow of three patients whose M protein disappeared from the
blood and in each case the tumor had also disappeared from the marrow. To date,
two of these patients underwent the most sensitive test known for detecting
myeloma, polymerase chain reaction, also known as PCR, testing. This test was
negative for the presence of tumor in the marrow. We are in the process of
performing the test on the remaining patients. Of the seven remaining patients,
six are stable for more than 24 weeks and one had disease progression that
occurred before 24 weeks after starting treatment. The treating physicians did
not report any side effects in this trial. The results of this trial suggest
that Mylovenge is safe and provide preliminary evidence that it may be
effective for treating multiple myeloma that is resistant to high dose
chemotherapy.
We are also conducting a Phase II clinical trial of Mylovenge in multiple
sites in the United States for treatment of patients with high numbers of tumor
cells that are resistant to standard therapy. Forty-three patients have
completed treatment in this trial to date. All of these patients had previously
failed standard chemotherapy and half of the patients had previously received
three or more different chemotherapy combinations. Seventeen of these patients
show signs of clinical benefit from our treatment. Of the 17 patients, five had
decreased M protein and 12 had stable M protein for at least 24 weeks after
beginning treatment. Fewer than two percent of Mylovenge infusions were
associated with serious side effects. We have extended this multicenter trial
to determine the efficacy of Mylovenge for treatment of patients with a low
number of tumor cells after stem cell transplantation. We anticipate beginning
an additional Phase II trial of Mylovenge for multiple myeloma patients who
have a low number of tumor cells after standard dose chemotherapy. If the
results of these trials continue to demonstrate favorable results, we
anticipate beginning Phase III trials of Mylovenge in 2001.
We have treated five patients with amyloidosis with Mylovenge, as part of
the Mayo Clinic multiple myeloma Phase II trial. Three of these patients have
shown evidence of significant clinical improvement even to damaged organs. None
of the patients had side effects from treatment. We are currently enrolling
additional amyloidosis patients in this trial.
APC8024 for Treatment of Multiple Cancers
Vaccine Description. APC8024 is our vaccine against tumors that have
increased levels of a protein called HER2 on their surface. We have identified
those portions of the HER2 molecule that stimulate the strongest cell-mediated
immune response and combined them with our Antigen Delivery Cassette. Our
preclinical studies indicate that our engineered antigen may be superior to
other HER2 antigens at stimulating cell-mediated immunity and prolonging
survival of tumor-bearing animals. As a result, we believe our vaccine approach
may be more effective than antibodies to HER2 in treating a variety of cancers.
Target Market. Many cancers, including approximately 25% of breast,
ovarian/uterine, pancreatic and colorectal cancers, have HER2 on their
surfaces. It is estimated that these four cancers will account for 414,000 new
cases and 150,000 deaths in the United States in 2000.
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Current Treatment. Breast cancer is the most common malignancy among women
in the United States. Screening with mammography has resulted in diagnosis of
many cancers before they have metastasized, when surgery and/or radiation
therapy is often curative. It is not possible to determine which tumors have
metastasized, however, and most women receive chemotherapy in an effort to
prevent recurrence. Breast cancer that has recurred after initial therapy is
fatal in nearly all cases, and treatment is directed toward prolonging survival
and alleviating symptoms. Many drugs are effective for shrinking tumors to a
level that is optimal for immunotherapy. In addition, the FDA has approved the
antibody Herceptin for treatment of breast cancers that have HER2 on their
surface. Herceptin is usually given in combination with chemotherapy in an
effort to alleviate symptoms and prolong survival. Treatment with Herceptin has
not been shown to be curative.
Ovarian cancer is a silent killer that usually grows undetected until it has
spread throughout the abdomen. After detection, women are treated with
extensive surgery followed by chemotherapy. This aggressive treatment
frequently reduces the number of tumor cells substantially but is not curative
for most patients. Once the cancer has recurred, the disease is usually fatal
within two years.
Pancreatic cancer grows in the abdomen undetected until it affects vital
organs, at which time surgery and radiation therapy are ineffective. More than
95% of patients with pancreatic cancer die of this disease. Chemotherapy, if
given, aims to control symptoms, but does not prolong survival.
Cancers involving the large intestine are called colorectal cancers. The FDA
has approved the immunotherapy drug Levamisole for prevention of recurrence of
colorectal cancer after initial surgery. Thus, colorectal cancer appears to be
sensitive to immunotherapy. Advanced colorectal cancer is resistant to
chemotherapy drugs and the only approved chemotherapy drugs simply alleviate
symptoms.
Vaccine Development. We are in the process of initiating two Phase I trials
to evaluate APC8024 for treatment of patients with tumors that have HER2 on
their surface. The two trials will examine different doses and schedules of
APC8024 for safety and ability to stimulate immunity. The first of these trials
is expected to begin enrolling patients later this year. We plan to use the
results of these two trials, if successful, to select one treatment regimen for
Phase II trials that will examine the effectiveness of APC8024 for treatment of
specific cancers.
APC80NY for Treatment of Multiple Cancers
APC80NY targets the NY-ESO protein that is present on many cancers,
including breast, prostate, lung, ovarian/uterine and bladder. It is estimated
that these cancers will account for 654,000 new cases and 267,000 deaths in the
United States in 2000. We licensed the NY-ESO antigen from the Ludwig Cancer
Institute, where scientists performed a series of preclinical studies that
demonstrated NY-ESO is an excellent immunotherapy target present in a wide
variety of tumors. We are currently engineering the NY-ESO antigen into our
Antigen Delivery Cassette. This involves identifying those regions of the
molecule that stimulate the strongest cell-mediated immunity and then combining
those regions to yield a protein that is most effectively presented by
dendritic cells. We expect to complete preclinical studies and, if the results
are positive, begin Phase I clinical trials of APC80NY in 2001.
APC80TR for Treatment of Multiple Cancers
APC80TR targets the Trp-P8 antigen that is present on 100% of prostate
cancers and approximately 71% of breast cancers, 93% of colorectal cancers and
80% of lung cancers. Trp-P8 is the first antigen generated from our internal
antigen discovery program. We plan to engineer the Trp-P8 antigen into our
Antigen Delivery Cassette. We will identify the cassette that stimulates the
strongest cell-mediated immunity and use this protein for our vaccine, APC80TR.
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Therapeutic Antibody Products
Danton Antibody for Treatment of Cancer
Danton is our therapeutic antibody which targets a unique antigen present on
normal and malignant blood cells and causes death of only malignant cells.
Danton's target is present on numerous blood-borne tumors, such as Hodgkin's
lymphoma, Non-Hodgkin lymphoma, and B-cell leukemias. It is estimated that
these tumors will account for 84,000 new cases and 43,500 deaths in the United
States in 2000. Current treatment for these cancers includes chemotherapy,
radiation, and high dose chemotherapy with stem cell transplantation, all of
which are highly toxic and only curative in a minority of cases. Preclinical
studies suggest that Danton can kill human cancer cells without apparent
toxicity or immune suppressive side effects. Furthermore, these preclinical
studies suggest that cancer cells may not develop resistance to this treatment
over time.
Dantes Antibody for Treatment of Autoimmune Disease
Dantes is our therapeutic antibody that suppresses activities of the immune
system. Autoimmune diseases such as rheumatoid arthritis, systemic lupus
erythematosus, multiple sclerosis, myasthenia gravis and pemphigus vulgaris,
result from unwanted activities of the immune system. In the United States,
approximately 4.2 million people currently suffer from these diseases. Current
therapeutics include nonspecific immune suppression by corticosteroids,
methotrexate and other drugs. Although these treatments may reduce tissue
damage in some patients, they are not curative.
Dantes is specific for a well-known target for immunosuppression, HLA-DR.
Previously other companies have attempted to develop drugs that targeted HLA-
DR. Although those drugs were usually effective immunosuppressants, they failed
in preclinical studies due to unacceptable toxicity. We have observed that
immunosupression and toxicity are mediated by two separate parts of the
antibody molecule. We are developing Dantes to take advantage of this
observation. Dantes has shown significant immunosuppressive abilities in our
preclinical studies without producing toxicity.
Additional Vaccine Products
We believe that our vaccine technologies have additional potential
applications that we will pursue in the fields of autoimmune diseases,
allergies and infectious diseases.
Autoimmune Diseases
Autoimmune diseases such as arthritis occur when immunoglobulins or T-cells
bind to self-antigens and damage the normal tissue. Our experience with
vaccines for treating immunoglobulin producing tumors such as multiple myeloma
suggests that our vaccine approach may be effective for treating autoimmune
diseases. Mylovenge directs the immune response to destroy cancerous cells that
produce a specific immunoglobulin, or M protein. We believe the same vaccine
approach may be used to direct the immune response to destroy non-cancerous
cells that produce disease-causing immunoglobulin. We believe that eliminating
these cells may be an effective way to treat patients with this disease. T-
cells have proteins on their surface that are similar to immunoglobulins and
that bind antigens causing autoimmune disease. We believe that our vaccine
approach may also be effective for stimulating the immune response to destroy
these T-cells.
Allergies
The trigger for an allergic reaction is the binding of an antigen such as
ragweed to an immunoglobulin. The resulting immune response is out of
proportion to the danger posed by the antigen and the excessive immune response
itself causes the disease. We believe that our therapeutic vaccine has the
potential to direct an immune response to destroy cells which produce allergy-
causing immunoglobulins.
Infectious Diseases
In chronic viral infections like AIDS, herpes and Hepatitis C, the virus
resides inside the cells. Antibodies are generally not effective for treating
these infections because antibodies cannot reach the cell interior. T-cells,
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in contrast, are effective for destroying cells that are infected by a virus.
Most vaccines stimulate antibody responses rather than T-cell responses. This
may explain why vaccines have not been effective in treating chronic viral
infections. In a pilot study of our therapeutic vaccine approach in patients
with AIDS, we prepared vaccines using dendritic cells from healthy siblings of
the patients. This pilot study suggests that our vaccines could stimulate a
strong, cell-mediated immune response to the AIDS virus.
Cell Separation Products
We have developed proprietary cell separation technology which can be
tailored for specific cell types. This technology consists of two components:
specially engineered separation containers, and solutions called buoyant
density solutions. We prepare our buoyant density solutions to match the
buoyant density of a particular cell type. By matching buoyant densities in
this manner, we are able to control whether or not a specific cell type floats
or sinks in the solution. This allows us to isolate the desired cells easily,
rapidly and without the need for the biological reagents used in conventional
cell separation techniques.
In 1996, we obtained 510(k) clearance from the FDA on a family of our
separation devices. In 1999, we obtained pre-marketing approval, or a PMA, from
the FDA for our DACS(R)SC kit. This product uses our cell separation technology
to prepare stem cells for transplantation following high dose chemotherapy,
which is standard therapy for many blood cell malignancies, such as multiple
myeloma, lymphoma and leukemias. Stem cells, sometimes called hematopoietic
progenitor cells, are collected from the blood before chemotherapy and infused
afterwards to restore the destroyed marrow.
We also use our cell separation technology to isolate dendritic cells for
our cancer vaccines. For cell types outside of our interests, we license our
technology to third parties. For example, we currently have agreements to allow
BioTransplant and Osiris to use our technology to isolate cells for their
products.
Collaborations
Kirin Brewery Co., Ltd.
Kirin is our collaborator for the marketing and development of our vaccines
in Asia. We have granted Kirin an exclusive license to our proprietary
dendritic cell technology for the development and commercialization of our
products in Japan and other Asian countries. We also granted Kirin an option to
obtain an exclusive license to commercialize in these countries other products
we develop with our dendritic cell technology. In exchange, Kirin has granted
us an option to obtain an exclusive license to commercialize in North America
any products developed by Kirin under this agreement.
Additionally, we conduct collaborative research with Kirin intended to
create improvements in our dendritic cell technology and to develop new
products. By agreement, Kirin will own all rights in these improvements and
will exclusively license them to us. We also supply Kirin with devices,
reagents and some of our proprietary antigens. Kirin, in turn, supplies us with
some of its proprietary antigens and other items. We and Kirin have also agreed
to collaborate in the clinical development and commercialization in the
European Union of novel products jointly developed under our agreements and to
share equally in any profits.
In connection with these agreements, Kirin has paid us an upfront license
fee of $5.0 million. In December 1998, Kirin exercised an option under the
agreement to receive rights to our prostate program for which Kirin paid us
$1.0 million and is obligated to pay us up to an additional $4.0 million in
fees and milestone payments. Kirin is solely responsible for the development
and clinical trials of the prostate program in Japan. We will also receive
royalties on sales of any products in Japan that utilize the licensed
technology. In April 2000, Kirin exercised an option under the agreement to
receive rights to our multiple myeloma program for which Kirin paid us $1.0
million and is obligated to pay us up to an additional $4.0 million in fees and
milestone payments. Kirin is solely responsible for the development and
clinical trials of the multiple myeloma program in Japan. We will also receive
royalties on sales of products in Japan that utilize the licensed technology.
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Additionally, Kirin is obligated to support our research efforts. We
received from Kirin $1.3 million for research funding in 1999 and Kirin is
obligated to pay $2.3 million in 2000. We are obligated to pay royalties to
Kirin on products that we sell in North America, developed by or in
collaboration with Kirin under these agreements. We and Kirin are also
obligated to pay for items supplied by the other party at the fully-burdened
manufacturing cost plus a handling fee. During 1999, we received $1.0 million
for antigens and cell processing devices supplied to Kirin under this
arrangement. Kirin has the right to terminate these agreements without cause on
90 days written notice after January 1, 2002.
Pursuant to these agreements, in February 2000, we exercised our right to
have Kirin purchase $5.0 million of our common stock at the initial public
offering price in a private placement simultaneous with the completion of this
offering.
BioTransplant, Inc.
In August 1996, we entered into an agreement with BioTransplant under which
we granted them a ten-year exclusive license to use our proprietary cell
separation technology for use in combination with solid organ transplantation.
In return for this license, we received an up-front fee and will receive
royalties on sales. In addition, BioTransplant is obligated to annual minimum
purchase amounts and payments to maintain exclusivity. The term of the
agreement extends to 2006, but can be renewed by BioTransplant, on terms
acceptable to us, for two years.
Osiris Therapeutics, Inc.
In February 1997, we entered into an agreement with Osiris under which we
granted them a non-exclusive license to use our proprietary cell separation
technology for use in the separation of mesenchymal stem cells, those cells
from which bone, muscle and cartilage are derived. In return for this license,
we received fees and will receive royalties on sales. The term of the agreement
extends to 2004 but can be extended by Osiris, on terms acceptable to us, for
two additional three-year terms.
Manufacturing
We manufacture the Antigen Delivery Cassettes used to conduct preclinical
and clinical trials. Our Antigen Delivery Cassettes are manufactured as
recombinant proteins using standard production methods in compliance with cGMP.
We intend to rely on third party contract manufacturers to produce larger
quantities of Antigen Delivery Cassettes for product commercialization.
We own and operate cell-processing centers in Mountain View, California and
Seattle, Washington. In addition, we use three third-party dendritic cell-
processing centers operated in conjunction with the Mayo Clinic in Rochester,
Minnesota, Kirin in Tokyo, Japan and the American Red Cross in Philadelphia,
Pennsylvania.
The use of our single-use, proprietary cell separation devices has enabled
us to perform dendritic cell processing in simple, well-controlled
manufacturing facilities. Our cell-processing centers take advantage of pre-
fabricated clean room technology used widely in the electronics industry. We
can assemble and validate a pre-fabricated clean room in 30 days. Accordingly,
we believe we can easily expand our cell-processing capacity.
We also manufacture cell separation devices that isolate cells from blood
and other bodily fluids. We rely on subcontractors to manufacture these devices
in full compliance with cGMP.
Marketing
We plan to market our products either directly or through co-marketing or
licensing agreements with established pharmaceutical companies. Due to the
concentrated distribution channels for the United States
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<PAGE>
oncology market, we plan to develop a direct sales force to market our cancer
vaccines in the United States. In market segments outside the United States and
for products with less concentrated distribution channels, like autoimmune
diseases, allergies and infectious diseases, we will seek strategic alliances
with leading pharmaceutical companies.
Intellectual Property
We protect our technology through United States and foreign patent filings,
trademarks and trade secrets. We have developed a strong patent estate. As of
April 27, 2000, we have 55 United States and foreign patents and have 170
patent applications pending. In addition, we have licensed 67 issued patents or
patent applications pending. Our issued patents expire on dates from May 22,
2007 through September 3, 2018. In addition, our issued and allowed patents
include patents that are directed to the solutions and devices by which cells
can be isolated and manipulated, including claims that apply specifically to
the isolation of dendritic cells, and claims on the use of antigen-pulsed
dendritic cells for immunotherapy, such as the use of idiotype-pulsed dendritic
cells to treat B-cell tumors. We have also received claims on a variety of
immunostimulatory antigen compositions. These include our Antigen Delivery
Cassette for use with a variety of tumor antigens and specifically, the
prostate antigen containing cassette. We intend to continue using our
scientific expertise to pursue and patent new developments with respect to
uses, compositions and factors to enhance our position in the cancer vaccine
field. However, the patent position of biopharmaceutical companies involves
complex legal and factual questions and, therefore, enforceability cannot be
predicted with certainty. Patents, if issued, may be challenged, invalidated or
circumvented. Thus, any patent that we own or license from third parties may
not provide adequate protection against competitors. Our pending patent
applications, those we may file in the future, or those we may license from
third parties may not result in issued patents. Also, patents may not provide
us with adequate proprietary protection or advantages against competitors with
similar or competing technologies. For example, we are aware of others that
have had patents issued to them in the dendritic cell field relating to methods
to isolate, culture or activate dendritic cells and relating to the treatment
with antigens of cancers such as prostate cancer.
We also rely on trade secrets and unpatentable know-how that we seek to
protect, in part, by confidentiality agreements. Our policy is to require our
officers, employees, consultants, contractors, manufacturers, outside
scientific collaborators and sponsored researchers and other advisors to
execute confidentiality agreements. These agreements provide that all
confidential information developed or made known to the individual during the
course of the individual's relationship with us be kept confidential and not
disclosed to third parties except in specific limited circumstances. We also
require signed confidentiality or material transfer agreements from companies
that are to receive our confidential data. In the case of employees,
consultants and contractors, confidentiality agreements with them generally
provide that all inventions conceived by the individual while rendering
services to us shall be assigned to us as our exclusive property. However, it
is possible that these agreements will be breached, and we may not have
adequate remedies for any breach. It is also possible that our trade secrets or
unpatentable know-how will otherwise become known or be independently developed
by competitors.
Competition
The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Many entities, including pharmaceutical and biotechnology
companies, academic institutions and other research organizations are actively
engaged in the discovery, research and development of products that could
compete directly with our products under development. Companies, including AVI
Biopharma, Inc., Cell Genesys, Inc., NW Biotherapeutics, Inc. and Vical
Incorporated have disclosed that they are developing cancer vaccines that may
compete with our products. Many companies, including major pharmaceutical
companies, are also developing alternative therapies that may compete with our
products in the fields of cancer, autoimmune diseases, allergies and infectious
diseases. Many of the companies developing cancer vaccines and alternative
treatments have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing. Others have
partnered with
40
<PAGE>
large established companies to obtain access to these resources. Smaller
companies may also prove to be significant competitors, particularly through
the establishment of collaborative arrangements with large, established
companies.
Our ability to compete effectively will depend, in large part, on our
ability to advance Provenge and Mylovenge through clinical trials and to
successfully manufacture and market these vaccines. To our knowledge, we are
the only company that has begun Phase III clinical development of a therapeutic
cancer vaccine for prostate cancer. Competition among products approved for
sale will be based, among other things, upon efficacy, reliability, product
safety, price and patent position. Our competitiveness will also be dependent
on our ability to advance our core technologies, license additional technology,
maintain a proprietary position in our technologies and products, obtain
required government and other public and private approvals on a timely basis,
attract and retain key personnel and enter into corporate partnerships that
enable us and our collaborators to develop effective products that can be
manufactured cost-effectively and marketed successfully.
Governmental Regulation
Governmental authorities in the United States and other countries
extensively regulate the preclinical and clinical testing, manufacturing,
labeling, storage, record-keeping, advertising, promotion, export, marketing
and distribution, among other things, of our immunotherapeutics. In the United
States, the FDA under the Federal Food, Drug, and Cosmetic Act, the Public
Health Service Act and other federal statutes and regulations subjects
pharmaceutical products to rigorous review. If we do not comply with applicable
requirements, we may be fined, our products may be recalled or seized, our
production may be totally or partially suspended, the government may refuse to
approve our marketing applications or allow us to distribute our products, and
we may be criminally prosecuted. The FDA also has the authority to revoke
previously granted marketing authorizations.
In order to obtain approval of a new product from the FDA, we must, among
other requirements, submit proof of safety and efficacy as well as detailed
information on the manufacture and composition of the product. In most cases,
this proof entails extensive laboratory tests, and preclinical and clinical
trials. This testing, the preparation of necessary applications and processing
of those applications by the FDA are expensive and typically take several years
to complete. The FDA may not act quickly or favorably in reviewing these
applications, and we may encounter significant difficulties or costs in our
efforts to obtain FDA approvals that could delay or preclude us from marketing
any products we may develop. The FDA may also require post-marketing testing
and surveillance to monitor the effects of approved products or place
conditions on any approvals that could restrict the commercial applications of
these products. Regulatory authorities may withdraw product approvals if we
fail to comply with regulatory standards or if we encounter problems following
initial marketing. With respect to patented products or technologies, delays
imposed by the governmental approval process may materially reduce the period
during which we will have the exclusive right to exploit the products or
technologies.
The first stage of the FDA approval process for a new biologic or drug
involves completion of preclinical studies and the submission of the results of
these studies, together with proposed clinical protocols, manufacturing
information, analytical data and other information to the FDA in an
investigational new drug application. This application must become effective
before human clinical trials may commence. The investigational new drug
application is automatically effective 30 days after receipt by the FDA, unless
before that time the FDA requests an extension to review the application, or
raises concerns or questions about the conduct of the trials as outlined in the
application. In the latter case, the sponsor of the application and the FDA
must resolve any outstanding concerns before clinical trials can proceed.
However, the submission of an investigational new drug application may not
result in the FDA authorizing us to commence clinical trials in any given case.
Preclinical studies involve laboratory evaluation of product characteristics
and animal studies to assess the efficacy and safety of the product. The FDA
regulates preclinical studies under a series of regulations called the current
Good Laboratory Practices regulations. If the sponsor violates these
regulations the FDA, in some cases, may invalidate the studies and require that
the sponsor replicate those studies.
41
<PAGE>
After an investigational new drug application becomes effective, a sponsor
may commence human clinical trials. The sponsor typically conducts human
clinical trials in three sequential phases, but the phases may overlap. In
Phase I clinical trials, the product is tested in a small number of patients or
healthy volunteers, primarily for safety at one or more doses. In Phase II, in
addition to safety, the sponsor evaluates the efficacy of the product in a
patient population somewhat larger than Phase I clinical trials. Phase III
clinical trials typically involve additional testing for safety and clinical
efficacy in an expanded population at geographically dispersed test sites. The
sponsor must submit to the FDA a clinical plan, or "protocol," accompanied by
the approval of the institution participating in the trials, prior to
commencement of each clinical trial. The FDA may order the temporary or
permanent discontinuation of a clinical trial at any time.
The sponsor must submit to the FDA the results of the preclinical and
clinical trials, together with, among other things, detailed information on the
manufacture and composition of the product, in the form of a new drug
application or, in the case of a biologic, a biologics license application. The
FDA is regulating our therapeutic vaccine products as biologics and, therefore,
we will be submitting biologics license applications to the FDA to obtain
approval of our products. In a process which generally takes several years, the
FDA reviews this application and, when and if it decides that adequate data is
available to show that the new compound is both safe and effective and that
other applicable requirements have been met, approves the drug or biologic for
marketing. The amount of time taken for this approval process is a function of
a number of variables, including the quality of the submission and studies
presented, the potential contribution that the compound will make in improving
the treatment of the disease in question, and the workload at the FDA. It is
possible that our vaccines will not successfully proceed through this approval
process or that the FDA will not approve them in any specific period of time,
or at all.
Congress enacted the Food and Drug Administration Modernization Act of 1997,
in part, to ensure the availability of safe and effective drugs, biologics and
medical devices by expediting the FDA review process for new products. The
Modernization Act establishes a statutory program for the approval of fast
track products, including biologics. A fast track product is defined as a new
drug or biologic intended for the treatment of a serious or life-threatening
condition that demonstrates the potential to address unmet medical needs for
this condition. Under the fast track program, the sponsor of a new drug or
biologic may request the FDA to designate the drug or biologic as a fast track
product at any time during the clinical development of the product.
The Modernization Act specifies that the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of the sponsor's
request. The FDA can base approval of a marketing application for a fast track
product on an effect, on a clinical endpoint or on another endpoint that is
reasonably likely to predict clinical benefit. The FDA may subject approval of
an application for a fast track product to post-approval studies to validate
the surrogate endpoint or confirm the effect on the clinical endpoint and prior
review of all promotional materials. In addition, the FDA may withdraw its
approval of a fast track product on a number of grounds, including the
sponsor's failure to conduct any required post-approval study with due
diligence.
If a preliminary review of clinical data suggests that a fast track product
may be effective, the FDA may initiate review of sections of a marketing
application for a fast track product before the sponsor completes the
application. This rolling review is available if the applicant provides a
schedule for submission of remaining information and pays applicable user fees.
However, the time periods specified under the Prescription Drug User Fee Act
concerning timing goals to which the FDA has committed in reviewing an
application, do not begin until the sponsor submits the entire application.
We may request fast track designation and orphan drug status for our
vaccines. Orphan drug designation may be granted to those products developed to
treat diseases or conditions that affect fewer than 200,000 persons in the
United States. We believe that some of our target cancer patient populations
meet these criteria. Under the law, the developer of an orphan drug may be
entitled to seven years of market exclusivity following the approval of the
product by the FDA, exemption from user fee payments to the FDA, and a
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50% tax credit for the amount of money spent on human clinical trials. We
cannot predict whether the FDA will grant these designations, nor can we
predict the ultimate impact, if any, of the fast track process on the timing or
likelihood of FDA approval of our immunotherapeutics.
The FDA may, during its review of a new drug application or biologics
license application, ask for additional test data. If the FDA does ultimately
approve the product, it may require post-marketing testing, including
potentially expensive Phase IV studies, and surveillance to monitor the safety
and effectiveness of the drug. In addition, the FDA may in some circumstances
impose restrictions on the use of the drug, which may be difficult and
expensive to administer, and may require prior approval of promotional
materials.
Before approving a new drug application or biologics license application,
the FDA will also inspect the facilities at which the product is manufactured
and will not approve the product unless the manufacturing facilities are in
compliance with current Good Manufacturing Practices. In addition, the
manufacture, holding, and distribution of a product must be in compliance with
current Good Manufacturing Practices. Manufacturers must continue to expend
time, money and effort in the area of production and quality control and record
keeping and reporting to ensure full compliance with those requirements. The
labeling, advertising, promotion, marketing and distribution of a drug or
biologic product must be in compliance with FDA regulatory requirements.
Failure to comply with applicable requirements can lead to the FDA demanding
that production and shipment cease, and, in some cases, that the manufacturer
recall products, or to FDA enforcement actions that can include seizures,
injunctions and criminal prosecution. These failures can also lead to FDA
withdrawal of approval to market the product.
We are also subject to regulation by the Occupational Safety and Health
Administration and the Environmental Protection Agency and to regulation under
the Toxic Substances Control Act, the Resource Conservation and Recovery Act
and other regulatory statutes, and may in the future be subject to other
federal, state or local regulations. Either or both of OSHA or the EPA may
promulgate regulations that may affect our research and development programs.
We are unable to predict whether any agency will adopt any regulation which
could limit or impede on our operations.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not we have obtained FDA approval, we must obtain approval of a
product by comparable regulatory authorities of foreign countries prior to the
commencement of marketing the product in those countries. The time required to
obtain this approval may be longer or shorter than that required for FDA
approval. The foreign regulatory approval process includes all the risks
associated with FDA regulation set forth above, as well as country-specific
regulations.
Employees
As of March 31, 2000, we had 81 employees. None of our employees are subject
to a collective bargaining agreement, and we believe that our relations with
our employees are good.
Facilities
We lease approximately 70,650 square feet of laboratory, manufacturing and
office space in Seattle, Washington under a lease expiring December 2008. The
lease may be extended at our option for two five-year periods. We sublease
approximately 15,250 square feet of this facility under a lease expiring March
2004. We lease approximately 25,000 square feet of laboratory, manufacturing
and office space in Mountain View, California under a lease expiring June 2001.
This lease may be extended at our option for one five year period. We sublease
approximately 18,600 square feet of this facility under a lease expiring June
2001.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
Our directors and executive officers, their positions and ages as of March
31, 2000 are listed below. No family relationships exist among any of our
directors or executive officers.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Christopher S. Henney, Ph.D., 59 President, Chief Executive Officer and
D.Sc. ........................ Director
T. Dennis George, J.D. ........ 62 Senior Vice President, Corporate Affairs,
General Counsel and Secretary
Martin A. Simonetti............ 42 Chief Financial Officer, Vice President,
Administration and Treasurer
David L. Urdal, Ph.D........... 50 Executive Vice President, Chief Scientific
Officer, and Vice Chairman of the Board
Frank H. Valone, M.D. ......... 50 Senior Vice President, Medical and
Regulatory Affairs, and Chief Medical
Officer
William Crouse (1)............. 57 Chairman of the Board
Gerardo Canet (2).............. 54 Director
Mark P. Carthy................. 39 Director
Timothy Harris, Ph.D. (1)...... 49 Director
Ruth Kunath.................... 48 Director
Lowell E. Sears (2)............ 49 Director
Ralph Shaw, J.D. (1)........... 61 Director
Douglas Watson (2)............. 55 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Christopher S. Henney, Ph.D., D.Sc., has served as our President, Chief
Executive Officer, and Director since May 1995. In 1989, Dr. Henney co-founded
ICOS Corporation, a publicly-held biotechnology company, where from 1989 to
1995, Dr. Henney served as Executive Vice President, Scientific Director and
Director. In 1981, Dr. Henney co-founded Immunex Corporation, a publicly-held
biotechnology company, where from 1981 to 1989, he held various positions,
including Director, Vice Chairman and Scientific Director. Dr. Henney was also
a former academic immunologist. Dr. Henney currently serves as a director of
Techne Corporation, Sonus Pharmaceuticals Inc., and Bionomics, Inc. Dr. Henney
received a B.Sc. with Honors, a Ph.D. in experimental pathology and a D.Sc. for
his contributions to immunology from the University of Birmingham, England.
T. Dennis George, J.D., has served as our Senior Vice President of Corporate
Affairs, General Counsel and Secretary since December 1999. From 1977 until
joining us, Mr. George was a partner in the law firm George, Hull, Porter &
Kohli, P.S. in Seattle, Washington. Mr. George is a member of the Washington
State, King County and American Bar Associations and is a former president of
the Federal Bar Association of the Western District of Washington. Mr. George
is admitted to the U.S. Supreme Court, U.S. Court of Appeals for the Ninth
Circuit and U.S. District Courts for the Western and Eastern Districts of
Washington. Mr. George received a B.S. with honors from Northern Michigan
University and a J.D. with honors from the University of Wisconsin Law School.
Martin A. Simonetti has served as our Chief Financial Officer, Vice
President, Administration and Treasurer since joining us in January 1999. From
1991 to 1998, Mr. Simonetti was employed at Amgen Inc., a pharmaceutical
company, where he held various positions, including Vice-President Operations
and Finance of Amgen BioPharma and their Director of Colorado Operations. From
1984 to 1991, Mr. Simonetti was employed at Genentech, Inc., a biotechnology
company, first as a scientist in their Medicinal and Analytical Chemistry
Department and later, after obtaining an M.B.A., as a financial analyst and
quality group controller.
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Mr. Simonetti received a B.S. and an M.S. in Nutrition from the University of
California, Davis and an M.B.A. from the University of Santa Clara.
David L. Urdal, Ph.D., has served as our Executive Vice President since
January 1999 and as our Chief Scientific Officer and Vice Chairman of our Board
of Directors since joining us in July 1995. From 1982 until July 1995, Dr.
Urdal held various positions with Immunex Corporation, including President of
Immunex Manufacturing Corporation, Vice President and Director of Development,
and head of the departments of biochemistry and membrane biochemistry. Dr.
Urdal received a B.S. and M.S. in Public Health and a Ph.D. in Biochemical
Oncology from the University of Washington.
Frank H. Valone, M.D., has served as our Senior Vice President, Medical and
Regulatory Affairs, since January 1999 and as our Chief Medical Officer since
1994. From 1991 until joining us, Dr. Valone was Associate Professor of
Medicine at Dartmouth-Hitchcock Medical Center, Norris Cotton Cancer Center.
From 1984 to 1991, Dr. Valone held various positions at the VA Medical Center
in San Francisco, including Chief of Hematology/Oncology. From 1982 to 1991,
Dr. Valone held faculty positions at the University of California, San
Francisco, including Associate Professor of Medicine. Prior to that time, Dr.
Valone served as an instructor in Medicine at Harvard Medical School and
instructor in Medical Oncology at the Dana Farber Cancer Institute. Dr. Valone
received a B.A. from Hamilton College and an M.D. from Harvard Medical School.
William Crouse has served as Chairman of our Board of Directors since April
1995 and as a Director since January 1994. Since 1994, Mr. Crouse has been
Managing Director of HealthCare Ventures LLC, the management company for
HealthCare Ventures III, L.P., HealthCare Ventures IV, and HealthCare Ventures
V, L.P., venture capital funds specializing in biotechnology. Prior to joining
HealthCare Ventures LLC, Mr. Crouse was Worldwide President of Ortho Diagnostic
Systems, Inc., a manufacturer of diagnostic tests and reagents, and a Vice
President of Johnson & Johnson International, from 1987 to 1993. Mr. Crouse
currently serves as a director of BioTransplant Inc. Mr. Crouse received a B.S.
in Finance and Economics from Lehigh University and an M.B.A. with Distinction
in Marketing Management from Pace University.
Gerardo Canet has served as one of our Directors since December 1996. Mr.
Canet has been President, Chief Executive Officer and chairman of the board of
IntegraMed America, Inc., a manager of reproductive fertility centers, since
1994. From 1989 to 1994, Mr. Canet held various executive management positions
with Curative Health Services, Inc., most recently as Executive Vice President
and President of its Wound Care Business Unit. From 1979 to 1989, Mr. Canet
held various management positions with Kimberly Quality Care, Inc., a provider
of home health care services, most recently as Executive Vice President and
Chief Operating Officer. Mr. Canet currently serves as a director of Curative
Health Services, Inc. Mr. Canet received a B.A. in Economics from Tufts
University and an M.B.A. from Suffolk University.
Mark P. Carthy has served as one of our Directors since March 2000. Since
September 1998, Mr. Carthy has been a biotechnology portfolio manager for
Morningside Ventures, which advises Kummell Investments Limited. From April
1997 to October 1998, Mr. Carthy was Chief Business Officer at Cubist
Pharmaceuticals, a biotechnology company. From January 1992 to April 1997,
Mr. Carthy was the Senior Director of Business Development for Vertex
Pharmaceuticals Inc. Mr. Carthy currently serves as a director of Variagenics,
Inc. Mr. Carthy received a B.E. in Chemical Engineering from the University
College Dublin, an M.Sc. in Chemical Engineering from the University of
Missouri and an M.B.A. from the Harvard Business School.
Timothy Harris, Ph.D., has served as one of our Directors since February
1999. Dr. Harris has been President and Chief Executive Officer of Structural
Genomix, a biotechnology company, since April 1999. From 1993 to January 1999,
Dr. Harris was Senior Vice President of Research and Development for Sequana
Therapeutics Inc., which became Axys Pharmaceuticals, Inc., a pharmaceutical
company, in 1998. Before joining Sequana, Dr. Harris was Director of
Biotechnology at Glaxo Group Research in England. Dr. Harris received a B.S.
and a Ph.D. in Virology from the University of Birmingham, England.
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<PAGE>
Ruth Kunath has served as one of our Directors since December 1999. Ms.
Kunath has been biotechnology portfolio manager for Vulcan Ventures
Incorporated, a venture capital firm founded by Paul G. Allen to research and
implement his investments, since 1992. Prior to her employment at Vulcan
Ventures Incorporated, Ms. Kunath spent nine years managing Seattle Capital
Management Equity transactions and eight years as the Senior Portfolio Manager
for the healthcare sector of Bank of America Capital Management. Ms. Kunath
currently serves as a director of VaxGen, Inc. Ms. Kunath received a B.A. from
DePaul University and is a Certified Financial Analyst.
Lowell E. Sears has served as one of our Directors since November 1995.
Since 1994, Mr. Sears has been Chairman and Chief Executive Officer of Sears
Capital Management, Inc., a life sciences venture capital and portfolio
management company. Prior to founding Sears Capital Management, Inc., Mr. Sears
was Chief Financial Officer of Amgen Inc., from 1988 to 1994, and also served
as its Senior Vice President responsible for the Asia-Pacific region. Mr. Sears
currently serves as a director for Neose Technologies, Inc. and Techne
Corporation. Mr. Sears received a B.A. in economics from Claremont McKenna
College and an M.B.A. from Stanford University.
Ralph Shaw, J.D., has served as one of our Directors since March 1996. Since
January 1983, Mr. Shaw has been the general partner of Shaw Venture Partners, a
venture capital firm formed by Mr. Shaw and U.S. Bancorp in 1983. In 1980, Mr.
Shaw formed Shaw Management Company, an investment counseling firm. Mr. Shaw
currently serves as a director of Schnitzer Steel Industries, Inc. Mr. Shaw
received a B.B.A. in Public Accounting from Hofstra University and a J.D. from
New York University's School of Law.
Douglas Watson has served as one of our Directors since February 2000. Mr.
Watson is Chief Executive Officer of Pittencrieff Glen Associates, a consulting
firm which he founded in June 1999. From January 1997 to May 1999, Mr. Watson
served as President and Chief Executive Officer of Novartis Corporation, a
pharmaceutical company. From April 1996 to December 1996, Mr. Watson served as
President and Chief Executive Officer of Ciba-Geigy Corporation. From April
1986 to March 1996, Mr. Watson served as the President of Ciba Pharmaceuticals
Division. Mr. Watson's career spanned 33 years with Novartis, having joined
Geigy (UK) Ltd. in 1966. Mr. Watson currently serves as a director of Engelhard
Corporation, a supplier of environmental technologies and chemical products,
and Summit Bank Corporation. Mr. Watson received an M.A. in Pure Mathematics
from Churchill College, Cambridge University.
Board Composition
We currently have authorized ten directors. Upon the closing of this
offering, the terms of office of our directors will be divided into three
classes: Class I, whose term will expire at the annual meeting of stockholders
to be held in 2001; Class II, whose terms will expire at the annual meeting of
stockholders to be held in 2002; and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2003. The Class I directors are
Gerardo Canet, Mark Carthy and Ralph Shaw; the Class II directors are William
Crouse, Timothy Harris and Ruth Kunath; and the Class III directors are
Christopher Henney, Lowell Sears, David Urdal and Douglas Watson. At each
annual meeting of stockholders after the initial classification, the successors
to directors whose terms will then expire will be elected to serve from the
time of election and qualification until the third annual meeting following
election. In addition, our certificate of incorporation will provide that the
authorized number of directors may be changed only by resolution of our 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 our board of directors may have the effect of delaying or
preventing changes in control or management of Dendreon, although our directors
may be removed for cause by the affirmative vote of the holders of a majority
of our common stock.
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<PAGE>
Board Committees
Audit Committee. Our audit committee consists of Gerardo Canet, Lowell Sears
and Douglas Watson. Lowell Sears serves as chairman of our audit committee. The
audit committee:
. makes recommendations to our board of directors about the selection of
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.
Compensation Committee. Our compensation committee consists of William
Crouse, Timothy Harris and Ralph Shaw. William Crouse serves as chairman of our
compensation committee. The compensation committee:
. reviews and approves the compensation and benefits for our executive
officers;
. administers our stock option plans; and
. makes recommendations to our board of directors about compensation
matters.
Compensation Committee Interlocks and Insider Participation
Decisions about executive compensation are made by the compensation
committee. No member of our compensation committee has been an officer or
employee of ours at any time. 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.
Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid by us during the fiscal year ended December 31, 1999, to our chief
executive officer and president and all of our most highly compensated
executive officers whose salary and bonus for the fiscal year exceeded
$100,000. Collectively, these individuals are referred to as "Named Executive
Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation Award
--------------------- ---------------------
Name and Principal Securities Underlying All other
Position Salary($) Bonus($)(1) Options (#) Compensation($)
------------------ --------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D., D.Sc. ......... $300,000 $100,000 65,450 --
President, Chief
Executive Officer and
Director
David L. Urdal,
Ph.D.,................ 240,000 50,000 39,270 --
Executive Vice
President, Chief
Scientific Officer and
Vice Chairman of the
Board
Frank H. Valone,
M.D. ................. 215,000 25,000 16,500 34,424(3)
Senior Vice President,
Clinical & Regulatory
Affairs, and Chief
Medical Officer
Martin A. Simonetti.... 175,000 20,000 88,000(2) 44,107(4)
Chief Financial
Officer, Vice
President,
Administration, and
Treasurer
</TABLE>
- --------
(1) Consists of bonus earned during fiscal 1999 and paid in January 2000.
(2) Represents options granted in January 1999 pursuant to commencement of
employment.
(3) Consists of temporary housing expenses and tax gross up payment.
(4) Consists of relocation expenses and tax gross up payment.
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<PAGE>
The following table shows certain information regarding stock options
granted to our Named Executive Officers during fiscal 1999. No stock
appreciation rights were granted in fiscal 1999. All options granted to these
executive officers in the last fiscal year were granted under our equity
incentive plan. Each option has a ten-year term, subject to earlier termination
if the optionee's service with us terminates. Unless otherwise noted, options
vest at the rate of 25% on the anniversary of the vesting commencement date and
1/48th monthly thereafter in 36 equal installments. The percentage of total
options set forth below is based on options to purchase 665,720 shares of
common stock granted to employees during fiscal 1999. All options are granted
at the fair market value on the date of grant as determined by our board of
directors. Potential realizable values are net of exercise price, but before
associated taxes based on the terms of the option at the time of grant. The 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by the Securities and Exchange Commission and do not represent our
estimate or projection of our future common stock price. Unless the market
price of the common stock appreciates over the option term, no value will be
realized from the option grants made to our Named Executive Officers. The
assumed 5% and 10% rates of stock appreciation are based on the assumed initial
public offering price of $13.00 per share.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Shares % of Total Appreciation for
Underlying Options Option Term(1)
Options Granted to Exercise Price Expiration ---------------------
Name Granted Employees Per Share($) Date 5% 10%
---- ---------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D, D.Sc. ........... 65,450 9.8 $0.91 1/1/09 $1,326,385 $2,147,326
David L. Urdal, Ph.D.... 39,270 5.9 0.91 1/1/09 795,831 1,288,396
Frank H. Valone, M.D.... 16,500 2.5 0.91 1/1/09 334,383 541,343
Martin A. Simonetti..... 88,000 13.2 0.91 1/1/09 1,783,375 2,887,161
</TABLE>
- --------
(1) Potential realizable values are computed by multiplying the number of
shares of common stock subject to a given option by the assumed initial
public offering price of $13.00 per share, 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
subtracting from that result the aggregate option exercise price.
48
<PAGE>
Options Exercises and Holdings
The following table sets forth the number of shares of common stock acquired
upon the exercise of stock options by the Named Executive Officers during
fiscal 1999, and the number and value of the shares of common stock underlying
unexercised options held by the Named Executive Officers as of December 31,
1999. The value realized is based on the fair market value of the underlying
securities as of the date of exercise, minus the per share exercise price,
multiplied by the number of shares underlying the option. The value of
unexercised in-the-money options is based on the assumed initial public
offering price of $13.00 per share less the exercise price, multiplied by the
number of shares underlying the option. All options were granted under our 1996
Equity Incentive Plan. Unless otherwise noted, these options generally vest at
the rate of 25% on the anniversary of the vesting commencement date and 1/48th
monthly thereafter in 36 equal installments.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of
Shares Underlying Value of Unexercised
Number of Unexercised Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D, D.Sc. (1)........ 211,026 $82,461 79,110 241,776 $ 893,792 $2,700,510
David L. Urdal,
Ph.D. (2).............. 92,571 30,958 -- 108,434 -- 1,205,854
Frank H. Valone,
M.D. (3)............... 11,000 4,900 146,380 40,620 1,656,803 450,747
Martin A. Simonetti..... -- -- -- 88,000 -- 960,000
</TABLE>
- --------
(1) Of Dr. Henney's options to purchase 320,886 shares of common stock as of
December 31, 1999, options to purchase 132,554 shares of common stock will
vest in 2001 or upon consummation of this offering, whichever occurs
first.
(2) Of Dr. Urdal's options to purchase 108,434 shares of common stock as of
December 31, 1999, options to purchase 44,185 shares of common stock will
vest in 2001 or upon consummation of this offering, whichever occurs
first.
(3) Of Dr. Valone's options to purchase 187,000 shares of common stock as of
December 31, 1999, options to purchase 64,625 shares of common stock
vested on the date of grant.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
In October 1998, we entered into an employment letter agreement with Drs.
Henney and Urdal. This agreement provides that Dr. Henney will receive an
annual base salary of $300,000 and Dr. Urdal will receive an annual base salary
of $240,000. In addition, Dr. Henney was granted an option to purchase 44,000
shares of our common stock at an exercise price of $0.91 per share, which vests
monthly on a pro rata basis over four years, beginning May 1, 1998. Dr. Urdal
was granted an option to purchase 16,500 shares of our common stock at an
exercise price of $0.91 per share, which vests monthly on a pro rata basis over
four years, beginning July 1, 1998. Under the agreement, we reaffirmed the 1995
grant of options to purchase 198,832 shares of our common stock at an exercise
price of $0.46 per share to Dr. Henney and options to purchase 66,277 shares of
our common stock at an exercise price of $0.46 per share to Dr. Urdal. One-
third of these options granted in 1995 vested when we entered into a strategic
collaboration with Kirin Brewery Co., Ltd. in December 1998, and two-thirds of
these options will vest upon the consummation of this offering or 2001,
whichever occurs first. With the exception of these 1995 options, the agreement
further provides that the vesting of all stock options held by Drs. Henney and
Urdal, respectively, will accelerate by one year if Drs. Henney or Urdal are
terminated for any reason other than cause.
49
<PAGE>
Director Compensation
Directors, Dr. Harris and Messrs. Canet, Sears and Watson, each currently
receive $1,500 for every board meeting attended in person and $500 for each
committee meeting attended in person, as compensation for their services as
members of our board of directors and as members of committees of our board of
directors. They are also reimbursed for out-of-pocket expenses incurred in
connection with board and committee meeting attendance. Messrs. Carthy, Crouse,
Shaw, Ms. Kunath and directors who are our employees do not receive any cash
compensation for serving on our board of directors or committees of our board
of directors.
From time to time, some of our directors have received grants of options to
purchase shares of our common stock under our equity incentive plans. In May
2000, pursuant to our 2000 Equity Incentive Plan, Messrs. Canet and Sears each
received an annual stock option grant to purchase 6,600 shares of our common
stock at an exercise price of $4.55 per share, which fully vest on the first
anniversary date of grant. In March 2000, Dr. Harris received an option to
purchase 16,500 shares of our common stock at an exercise price of $4.55 per
share, which vest at the rate of 33 1/3% per year. Upon joining our board of
directors, in January 2000 and February 2000, Ms. Kunath and Mr. Watson,
respectively, each received an option to purchase 26,400 shares of our common
stock at an exercise price of $1.82 per share, which vest at the rate of 25% on
the first anniversary from the date of grant and 1/48th monthly thereafter. In
May 1999, Messrs. Canet and Sears each received an option to purchase 6,875
shares of our common stock at an exercise price of $0.91 per share. These
options were fully vested and immediately exercisable as of the date of grant.
Upon joining our board of directors in February 1999, Dr. Harris received an
option to purchase 27,500 shares of our common stock at an exercise price of
$0.91 per share. In October 1995, Mr. Sears was granted an option to purchase
an aggregate of 8,250 shares of our common stock at an exercise price of $5.45
per share, 6,875 of which were fully vested and immediately exercisable as of
the date of grant and the remaining 1,375 vest at the rate of 25% on the first
anniversary from the date of grant and 1/48th monthly thereafter pursuant to a
consulting agreement between Mr. Sears and us. The consulting agreement
terminated pursuant to its terms in October 1999.
Under the 2000 Equity Incentive Plan, Dr. Harris and Messrs. Canet, Sears
and Watson, and any newly elected directors, will each receive automatic annual
stock option grants for serving on our board of directors. See "Management--
Employee Benefit Plans."
Employee Benefit Plans
2000 Equity Incentive Plan
Our board of directors adopted, on March 1, 2000, and our stockholders
approved on May 1, 2000, our 2000 Equity Incentive Plan. The 2000 Equity
Incentive Plan is an amendment and restatement of our 1996 Equity Incentive
Plan (the "1996 Plan"). A total of four million four hundred thousand
(4,400,000) shares of common stock have been authorized for issuance under the
2000 Equity Incentive Plan. Each year, the number of shares reserved for
issuance under the plan will automatically be increased by the least of (i)
five percent (5%) of the total number of shares of our common stock then
outstanding, (ii) five hundred fifty thousand (550,000) shares, or (iii) a
number to be determined by the board of directors. Shares subject to stock
awards that have expired or otherwise terminated without having been exercised
in full again become available for grant, but exercised shares repurchased by
us under a right of repurchase will not again become available for grant.
The 2000 Equity Incentive Plan permits the grant of options to our
employees, directors, consultants and those of our affiliates. Options may be
either incentive stock options, within the meaning of Section 422 of the
Internal Revenue Code, to employees or nonstatutory stock options. In addition,
the 2000 Equity Incentive Plan permits the grant of stock bonuses and rights to
purchase restricted stock. No person may be granted options covering more than
five hundred fifty thousand (550,000) shares of common stock in any calendar
year.
The 2000 Equity Incentive Plan is administered by the board of directors or
a committee appointed by the board of directors. The board of directors has
delegated the authority to administer the 2000 Equity Incentive
50
<PAGE>
Plan to the compensation committee. Subject to the limitations set forth in the
2000 Equity Incentive Plan, the compensation committee has the authority to
select the eligible persons to whom award grants are to be made, to designate
the number of shares to be covered by each award, to determine whether an
option is to be an incentive stock option or a nonstatutory stock option, to
establish vesting schedules, to specify the exercise price of options and the
type of consideration to be paid upon exercise and, subject to applicable
restrictions, to specify other terms of awards.
The maximum term of options granted under the 2000 Equity Incentive Plan is
ten years. Incentive stock options granted under the 2000 Equity Incentive Plan
generally are non-transferable. Nonstatutory stock options generally are non-
transferable, although the applicable option agreement may permit some
transfers. Options generally expire three months after the termination of an
optionholder's service. However, if an optionholder is permanently disabled or
dies during his or her service, that person's options generally may be
exercised up to 12 months following disability or 18 months following death.
The exercise price of options granted under the 2000 Equity Incentive Plan
is determined by the board of directors, committee or administrator in
accordance with the guidelines set forth in the 2000 Equity Incentive Plan. The
exercise price of an incentive stock option cannot be less than 100% of the
fair market value of the common stock on the date of the grant. The exercise
price of a nonstatutory stock option cannot be less than 85% of the fair market
value of the common stock on the date of grant.
Options granted under the 2000 Equity Incentive Plan vest at the rate
determined by the board of directors, committee or administrator and specified
in the option agreement. Typically, options granted under this plan vest over
four years, at the rate of 25% of the shares subject to the option vesting
after one year from the grant date and then vest monthly thereafter. The terms
of any stock bonuses or restricted stock purchase awards granted under the 2000
Equity Incentive Plan will be determined by the board of directors, committee
or administrator. The purchase price of restricted stock under any restricted
stock purchase agreement will not be less than 85% of the fair market value of
our common stock on the date of grant. Stock bonuses and restricted stock
purchase agreements awarded under the 2000 Equity Incentive Plan are generally
non-transferable, although the applicable award agreement may permit some
transfers.
Non-Employee Director Stock Option Grants. The 2000 Equity Incentive Plan
also provides for automatic stock option grants to non-employee directors
serving on the board of directors who were invited to join the board of
directors other than in connection with the director's investment in the
company at the time of the director's election to the board of directors. Each
person who is elected or appointed for the first time to be a non-employee
director subsequent to the adoption of the Equity Incentive Plan will receive
an initial grant on the date of his or her election or appointment to the board
of directors to purchase twenty-six thousand four hundred (26,400) shares of
our common stock. All options granted to non-employee directors will be granted
at the fair market value of the common stock on the date of grant.
The 2000 Equity Incentive Plan also provides that eligible non-employee
directors will automatically receive an annual grant to purchase six thousand
six hundred (6,600) shares of our common stock commencing, as applicable, on
the fourth anniversary of (i) the date of the initial grant to the director or
(ii) the initial election of the non-employee director to the board of
directors. Messrs. Crouse, Carthy and Shaw are not eligible for automatic
grants under the 2000 Equity Incentive Plan.
The non-employee director stock options will have a maximum term of ten
years for an initial grant and five years for an annual grant, and generally
must be exercised prior to the earliest of 18 months following the death of the
non-employee director, 12 months from the termination of service on the board
of directors by the non-employee director due to a disability, 3 months from
the termination of the service of the non-employee director for any other
reason, or the expiration of the original term of the stock option. Twenty-five
percent of shares pursuant to each initial grant of a non-employee director
option vest one year from the date of grant and 1/48th of the shares vest
monthly thereafter. One hundred percent of the shares pursuant to each annual
grant of a non-employee director option vest one year from the date of grant.
51
<PAGE>
Upon some types of changes in control in our ownership, all outstanding
stock awards under the 2000 Equity Incentive Plan must either be assumed or
substituted by the surviving entity. In the event the surviving entity does not
assume or substitute the stock awards, then the vesting and exercisability of
outstanding awards will accelerate prior to the change in control and the
awards will terminate to the extent they are not exercised prior to the change
in control. The stock options will not be transferable except as otherwise
provided in a stock option agreement to the extent permitted by federal
securities laws and regulations.
The board of directors may amend or terminate the 2000 Equity Incentive Plan
at any time. Amendments will generally be submitted for stockholder approval to
the extent required by applicable law.
As of March 31, 2000, we had issued and outstanding under the 2000 Equity
Incentive Plan options to purchase 1,929,263 shares of common stock. The per
share exercise prices of these options range from $0.46 to $4.55. As of March
31, 2000, 1,254,598 shares remain available for grant under the 2000 Equity
Incentive Plan.
2000 Employee Stock Purchase Plan
Effective upon the completion of this offering, we will implement the 2000
Employee Stock Purchase Plan, which was approved by the board of directors on
March 1, 2000. A total of one million four hundred eighty-five thousand
(1,485,000) shares of common stock have been reserved for issuance under this
purchase plan. Each year, the number of shares reserved for issuance under the
purchase plan will automatically be increased by the least of (i) one percent
(1%) of the total number of shares of our common stock then outstanding,
(ii) four hundred forty thousand (440,000) shares, or (iii) a number 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. Under the 2000 Employee Stock Purchase Plan, the board of
directors or a committee comprised of at least two members of the board of
directors may authorize participation by eligible employees, including
officers, in periodic offerings following the commencement of the purchase
plan. The initial offering under the purchase plan will commence on the
effective date of this offering and terminate on July 31, 2002. It will have
purchase dates on January 31, 2001, July 31, 2001, January 31, 2002 and July
31, 2002.
Unless otherwise determined by the board of directors, employees are
eligible to participate in the 2000 Employee Stock Purchase Plan only if they
are customarily employed by us or one of our subsidiaries designated by the
board of directors for at least twenty (20) hours per week and five (5) months
per calendar year and have completed at least ten (10) days of continued
employment. The ten (10) day continued employment requirement will be waived
for the initial offering. Employees who participate in an offering may have up
to fifteen percent (15%) of their eligible earnings withheld under the purchase
plan. The amount withheld is then used to purchase shares of the common stock
on specified dates determined by the board of directors. The price of common
stock purchased under the purchase plan will be equal to 85% of the lower of
the fair market value of the common stock at the commencement date of each
offering period or the relevant purchase date. Employees may end their
participation in an offering at any time during that offering, and their
participation will end automatically on termination of their employment with us
or one of our affiliates.
In the event of a merger, reorganization, consolidation or liquidation that
involves us, the board of directors has discretion to provide that each right
to purchase common stock will be assumed or an equivalent right substituted by
the successor corporation or the board of directors may provide for all sums
collected by payroll deductions to be applied to purchase stock immediately
prior to a merger or other transaction. The board of directors has the
authority to amend or terminate the purchase plan, provided, however, that no
action may limit or reduce any outstanding rights to purchase common stock.
52
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain related party transactions since
January 1997 to which we were or are a party or in which certain of our
executive officers, directors or 5% stockholders have or had a direct or
indirect material interest. We believe that each of these agreements was made
on terms at least as fair to us as could have been obtained from unaffiliated
third parties.
Series C Preferred Stock
From June 1997 to and August 1997, we sold an aggregate of 3,308,179 shares
of Series C preferred stock at a price per share of $3.60 to a group of private
investors that include the following directors, officers and 5% stockholders:
<TABLE>
<CAPTION>
Shares of Series C
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Kummell Investments Limited............................. 833,333
Affiliates of Sanderling Ventures....................... 694,444
New York Life Insurance Company......................... 555,555
Affiliates of HealthCare Ventures V, L.P. .............. 277,777
Vulcan Ventures Incorporated............................ 277,777
Shaw Venture Partners III, L.P. ........................ 138,889
The Sears Living Trust DTD 3/11/91...................... 13,888
</TABLE>
Ralph Shaw, one of our directors, is a general partner of Shaw Venture
Partners III, L.P. Lowell E. Sears, one of our directors, is the trustee of The
Sears Living Trust DTD 3/11/91. Mark Carthy, one of our directors, advises
Kummel Investments Limited on its venture capital portfolio.
Series D Preferred Stock
In July 1998, we sold an aggregate of 937,000 shares of Series D Preferred
Stock at a price per share of $5.00 to a group of private investors that
include the following directors, officers and 5% stockholders:
<TABLE>
<CAPTION>
Shares of Series D
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Vulcan Ventures Incorporated............................ 200,000
New York Life Insurance Company......................... 120,000
Shaw Venture Partners III, L.P. ........................ 100,000
Kummell Investments Limited............................. 50,000
</TABLE>
Series E Preferred Stock
From September 1999 to February 2000, we sold an aggregate of 4,069,553
shares of Series E Preferred Stock at a price per share of $4.25 to a group of
private investors that include the following directors, officers and 5%
stockholders:
<TABLE>
<CAPTION>
Shares of Series E
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Vulcan Ventures Incorporated............................ 2,352,950
Affiliates of HealthCare Ventures....................... 235,300
Kummell Investments Limited............................. 117,650
New York Life Insurance Company......................... 117,650
Affiliates of Sanderling Ventures....................... 117,650
Shaw Venture Partners III, L.P. ........................ 70,585
Sears Living Trust DTD 3/11/91.......................... 10,000
Martin A. & Mary Ann Simonetti.......................... 10,000
</TABLE>
53
<PAGE>
Other Transactions
In December 1996, we entered into an employment agreement with Christopher
S. Henney, Ph.D., D.Sc., our President and Chief Executive Officer. This
agreement terminated pursuant to its terms in April 1998. In December 1996, we
entered into an employment agreement with David L. Urdal, Ph.D., our Executive
Vice President, Chief Scientific Officer and Vice Chairman of our board of
directors. This agreement terminated pursuant to its terms in July 1998.
We have entered into compensation arrangements with some of our directors as
described in "Management--Director Compensation."
We have entered into employment arrangements with some of our executive
officers as described in "Management--Employment Contracts, Termination of
Employment and Change-in-Control Arrangements."
We have granted registration rights to all of the above stockholders as
described under "Description of Capital Stock--Registration Rights."
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as of March 31, 2000, and as adjusted to reflect the
completion of this offering and the concurrent issuance of shares to Kirin, by
(1) each person (or group of affiliated persons) known by us to own
beneficially more than five percent of the outstanding shares of our common
stock, (2) each of our directors and executive officers, and (3) all of our
directors and executive officers as a group. Unless otherwise indicated, the
address of each of the named individuals is c/o Dendreon Corporation, 3005
First Avenue, Seattle, Washington 98121. Except as otherwise indicated, and
subject to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of common
stock held by them. Beneficial ownership is determined in accordance with the
rules of the SEC. Shares of common stock subject to options or warrants that
are exercisable or will become exercisable within 60 days of March 31, 2000 are
deemed outstanding for the purpose of computing the percentage of ownership of
the person or entity holding options or warrants but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person or entity. Percentage of shares beneficially owned is based on (1)
15,871,540 shares of common stock outstanding as of March 31, 2000, after
giving effect to the conversion of all preferred stock into 14,386,945 shares
of common stock and (2) 20,756,155 shares of common stock to be outstanding
upon the consummation of this offering, including 384,615 shares to be issued
to Kirin concurrently with the closing of this offering.
<TABLE>
<CAPTION>
Shares Percentage Beneficially Owned
Beneficially ------------------------------
Name and Address Owned Before Offering After Offering
- ---------------- ------------ --------------- --------------
<S> <C> <C> <C>
5% Stockholders
Entities affiliated with
HealthCare Ventures LLC (1)...... 3,809,322 23.8% 18.3%
44 Nassau Street
Princeton, NJ 08542
Vulcan Ventures Incorporated (2).. 3,436,491 21.7 16.6
110-110th Avenue NE, Suite 550
Bellevue, WA 98004
Entities affiliated with
Sanderling Ventures.............. 1,215,991 7.7 5.9
2730 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Kummell Investments Limited (3)... 1,101,081 6.9 5.3
Suite 835A
Europort, Gibraltar (via London)
New York Life Insurance Co. ...... 872,525 5.5 4.2
Venture Capital Group, Room 207
51 Madison Avenue
New York, NY 10010
Named Executive Officers and Directors
Christopher S. Henney, Ph.D.,
D.Sc. (4)........................ 273,769 1.7 1.3
T. Dennis George.................. -- * *
Martin A. Simonetti (5)........... 40,333 * *
David L. Urdal, Ph.D. (6)......... 293,091 1.8 1.4
Frank H. Valone (7)............... 190,040 1.2 *
William Crouse (1)................ 3,809,322 23.8 18.3
Gerardo Canet (8)................. 41,250 * *
Mark P. Carthy (3)................ 1,101,081 6.9 5.3
Timothy Harris (9)................ 6,875 * *
Ruth Kunath (2)................... 3,436,491 21.7 16.6
Lowell E. Sears (10).............. 154,932 1.0 *
Ralph Shaw (11)................... 671,178 4.3 3.2
Douglas Watson.................... -- * *
All executive officers and
directors as a group (13 persons)
(12)............................. 10,018,362 61.5 47.3
</TABLE>
55
<PAGE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Includes 2,423,699 shares and warrants to purchase 84,639 shares held by
HealthCare Ventures III, L.P., 711,745 shares and warrants to purchase
24,855 shares held by HealthCare Ventures IV, L.P. and 564,384 shares held
by HealthCare Ventures V, L.P. Mr. William Crouse is the Managing Director
of HealthCare Ventures LLC, the management company for HealthCare Ventures
III, L.P., HealthCare Ventures IV, L.P., and HealthCare Ventures V, L.P.
Mr. Crouse disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
(2) Ms. Ruth Kunath manages the Vulcan Venture Biotechnology Portfolio as an
employee of Vulcan Ventures Incorporated. Ms. Kunath disclaims beneficial
ownership of these shares except to the extent of her pecuniary interest
therein.
(3) Morningside Ventures Inc. advises Kummel Investments Limited on its
venture capital investments. Mr. Carthy is the biotechnology portfolio
manager for Morningside Ventures Inc. Mr. Carthy disclaims beneficial
ownership of the shares held by Kummel Investments Limited except to the
extent of his pecuniary interest therein.
(4) Includes 5,936 shares issuable on exercise of outstanding options
exercisable within 60 days of March 31, 2000 and options to purchase
132,554 shares of common stock which will vest upon consummation of this
offering.
(5) Includes 3,667 shares issuable on exercise of outstanding options
exercisable within 60 days of March 31, 2000.
(6) Includes 213,170 shares held jointly with Shirley G. Urdal. Also includes
3,468 shares issuable on exercise of outstanding options exercisable
within 60 days of March 31, 2000 and options to purchase 44,185 shares
which will vest upon consummation of this offering.
(7) Includes: (a) 15,458 shares held by Judy Valone, Trustee for Frank H.
Valone III; (b) 15,780 shares held by Judy Valone, Trustee for Justin
Valone; (c) 14,817 shares held by Judy Valone, Trustee for Elizabeth L.
Valone; and (d) 96,909 shares issuable on exercise of outstanding options
exercisable within 60 days of March 31, 2000. As trustee for Frank H.
Valone III, Justin Valone and Elizabeth L. Valone, Ms. Judy Valone, the
spouse of Frank Valone, holds voting and dispositive power over all shares
held by the trusts.
(8) Includes 13,750 shares issuable on exercise of outstanding options
exercisable within 60 days of March 31, 2000.
(9) Includes 6,875 shares issuable on exercise of outstanding options
exercisable within 60 days of March 31, 2000.
(10) Includes 138,210 shares held by The Sears Living Trust DTD 3/11/91 and
6,875 shares issuable on exercise of outstanding options exercisable
within 60 days of March 31, 2000. As the trustee of The Sears Living Trust
DTD 3/11/91, Mr. Sears has voting and dispositive power over all shares
held by the trust.
(11) Includes 663,112 shares held by Shaw Venture Partners III, L.P. Mr. Ralph
Shaw is a general partner of Shaw Venture Partner III, L.P. Mr. Shaw
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(12) Includes an aggregate of 314,219 shares of common stock issuable on
exercise of outstanding options exercisable upon completion of this
offering or within 60 days of March 31, 2000 and warrants to purchase in
aggregate of 109,494 shares.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
On the closing of this offering, our authorized capital stock will consist
of 80,000,000 shares of common stock, $.001 par value, and 10,000,000 shares of
preferred stock, $.001 par value.
Common Stock
As of March 31, 2000, there were 15,871,540 shares of common stock
outstanding that were held of record by approximately 146 stockholders. There
will be 20,756,155 shares of common stock outstanding after giving effect to
the sale of the shares of common stock to the public offered hereby and the
sale of shares of common stock to Kirin in a private placement concurrent
with the closing of this offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably all dividends, if any, as may be declared from
time to time by the board of directors out of funds legally available. In the
event of the liquidation, dissolution or winding up of Dendreon, the holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred
stock, if any, then outstanding. The common stock has 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, and the shares of common
stock to be issued upon completion of this offering will be fully paid and
nonassessable.
Preferred Stock
On our closing of this offering, our certificate of incorporation will
authorize 10,000,000 shares of preferred stock. The board of directors has the
authority to issue the preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of any series, without further vote
or action by the stockholders. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of Dendreon
without further action by the stockholders. For example, the board of directors
could issue preferred stock that has the power to prevent a change of control
transaction. The issuance of preferred stock with voting and conversion rights
may decrease the voting power of the holders of common stock, including the
loss of voting control to others. We currently have no plans to issue any
preferred stock.
Warrants
Upon completion of this offering, we will have outstanding warrants to
purchase 532,543 shares of common stock. Some of these warrants were
exercisable for preferred stock, but upon the closing of the offering, they
will automatically become warrants to purchase shares of our common stock. The
numbers of shares, exercise prices and dates of these warrants are summarized
below:
<TABLE>
<CAPTION>
Number
of
Shares Exercise Price Expiration Date
------ -------------- ---------------
<S> <C> <C>
112,831 $ 0.18 December 31, 2005
47,362 $ 3.27 August 14, 2004 to December 11, 2004
364,100 $ 4.55 October 17, 2004 to August 3, 2006
8,250 $18.18 May 1, 2005
</TABLE>
57
<PAGE>
Registration Rights
On the date 180 days after the completion of this offering, the holders of
up to 14,386,945 shares of our common stock and holders of warrants to purchase
an aggregate of 121,079 shares of our common stock will be entitled to
registration rights as provided under the terms of an Amended and Restated
Stockholders' Agreement. This agreement provides demand registration rights to
the holders of these shares. In addition, the holders of these shares are
entitled under the agreement, subject to certain limitations, to require us to
include their shares of common stock in future registration statements we file.
In connection with a warrant issued to Fresenius AG to purchase 275,000
shares of our common stock, Fresenius AG is entitled to registration rights
under a Registration Rights and Shareholder's Agreement for the shares of
common stock issuable upon exercise of the warrant. Under this agreement,
Fresenius can, subject to certain limitations, require us to include their
shares of common stock in future registrations statements we file.
Anti-takeover Effects of Provisions of Certificate of Incorporation and
Delaware Law
Certificate of Incorporation
On the closing of this offering, our certificate of incorporation will
include the following provisions, among others, that could discourage potential
acquisition proposals and could delay or prevent a change of control of
Dendreon:
. All stockholder actions must be effected at a duly called meeting and
not by a consent in writing.
. Directors may be removed from office only for cause and only by the
affirmative vote of the holders of a majority of our total outstanding
voting stock.
. Vacancies on our board of directors, including those resulting from an
increase in the number of directors, may generally be filled only by the
remaining directors, not by stockholders.
. Our board of directors is divided into three classes of directors
serving staggered, three-year terms. The classification of the board of
directors has the effect of requiring at least two annual stockholder
meetings, instead of one, to replace a majority of the members of the
board of directors.
Anti-takeover Provisions of Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates "business combinations" with an "interested stockholder." Subject to
some exceptions, Section 203 prohibits a publicly held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
. before the date of the business combination, the board of directors of
the corporation approves the transaction;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 85% of the outstanding stock of the corporation; or
. the board of directors and at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder approve the
business combination.
A "business combination" includes mergers, assets sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to various exceptions, an "interested stockholder" is a person who,
together with the stockholder's affiliates and associates, owns, or within
three years did own, 15% or more of the corporation's voting stock. This
statute could prohibit or delay mergers or other takeover or change-in-control
attempts with respect to us and, accordingly, may discourage attempts to
acquire us.
58
<PAGE>
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages
for breach of that individual's fiduciary duties as a director except for
liability (A) for any breach of the director's duty of loyalty to the company
or to its stockholders, (B) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (C) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (D) for any
transaction from which a director derives an improper personal benefit.
Our bylaws provide that we must indemnify our directors and executive
officers and may indemnify our officers, employees and other agents to the
fullest extent not prohibited by law. We believe that indemnification under our
bylaws covers at least negligence on the part of an indemnified party. Our
bylaws also permit us to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of his or
her status or service as a director, officer, employee or other agent of
Dendreon upon an undertaking by him or her to repay any advances if it is
ultimately determined that he or she is not entitled to indemnification.
We intend to enter into separate indemnification agreements with our
directors and officers. These agreements will require us to, among other
things, indemnify the director or officer against expenses, including
attorney's fees, judgements, fines and settlements paid by the individual in
connection with any action, suit or proceeding arising out of the individual's
status or service as a director or officer of Dendreon, other than liabilities
arising from willful misconduct or conduct that is knowingly fraudulent or
deliberately dishonest, and to advance expenses incurred by the individual in
connection with any proceeding against him or her individually with respect to
which he or she may be entitled to indemnification by us. We believe that our
certificate of incorporation and bylaw provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and executive officers. We also maintain directors' and officers' liability
insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Dendreon where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling
Dendreon, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Transfer Agent
The transfer agent for the common stock is ChaseMellon Shareholder Services,
L.L.C., Seattle, Washington.
Listing
Application has been made to include our common stock for quotation in the
Nasdaq National Market under the trading symbol "DNDN."
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, 20,756,155 shares of common stock will be outstanding,
21,431,155 shares if the underwriters exercise their over-allotment option in
full. Of these shares, the 4,500,000 shares sold in this offering, or the
5,175,000 shares if the underwriters exercise their over-allotment option in
full, will be freely tradable without restriction under the Securities Act
except for any shares purchased by our "affiliates" as defined in Rule 144
under the Securities Act. The remaining 16,256,155 shares, based on shares
outstanding as of March 31, 2000, and including the 384,615 shares of common
stock to be purchased by Kirin, are "restricted securities" within the meaning
of Rule 144 under the Securities Act. The restricted securities generally may
not be sold unless they are registered under the Securities Act or are sold
pursuant to an exemption from registration, such as the exemption provided by
Rule 144 under the Securities Act.
Our officers, directors and substantially all of our stockholders have
entered into lock-up agreements pursuant to which they have agreed not to offer
or sell any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock, for a period of 180 days after the
date of this prospectus without the prior written consent of Prudential
Securities Incorporated, on behalf of the underwriters. Prudential Securities
Incorporated may, at any time and without notice, waive any of the terms of
these lock-up agreements.
The following table indicates approximately when the shares of our common
stock that are not being sold in the offering but which were outstanding as of
March 31, 2000 will be eligible for sale into the public market, except for
174,311 shares eligible for resale on the date of this prospectus:
<TABLE>
<CAPTION>
Number of Shares Date of Eligibility for Resale into Public Markets
---------------- --------------------------------------------------
<C> <S>
14,564,749 180 days after the date of this prospectus due to lock-up
agreements substantially all of our stockholders have
entered into with Prudential Securities Incorporated (in
the case of 14,474,118 shares) or with us (in the case of
90,631 shares).
1,132,480 Between 180 and 365 days after the date of this prospectus
due to requirements of the federal securities laws.
</TABLE>
After the lock-up is released, restricted securities will be saleable under
Rules 144, 144(k) and 701.
In general, under Rule 144 as currently in effect, any person, including an
affiliate, who has beneficially owned shares for a period of at least one year
is entitled to sell, within any three-month period, a number of shares that
does not exceed the greater of:
. 1% of the then-outstanding shares of common stock, or
. the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to certain provisions relating to notice
and manner of sale and the availability of current public information about us.
In addition, a person who has not been one of our affiliates at any time during
the 90 days immediately preceding a sale, and who has beneficially owned the
shares for at least two years, would be entitled to sell such shares under Rule
144(k) without regard to the volume limitation and other conditions described
above. The foregoing summary of Rule 144 is not intended to be a complete
description.
60
<PAGE>
Rule 701 permits any of our employees, officers, directors or consultants
who purchased their shares under a compensatory stock or option plan or other
written agreement prior to the effective date of this offering to sell such
shares under Rule 144 without complying with the holding period, public
information, volume limitation or notice requirements of Rule 144. All holders
of Rule 701 shares may not sell their Rule 701 shares until 90 days after the
date of this prospectus. However, substantially all shares of our common stock
issued under Rule 701 are subject to lock-up agreements described above.
We intend to file, within 90 days of effective date of this offering, a
registration statement on Form S-8 to register all shares of common stock
issuable under our Employee Stock Purchase Plan and the 2000 Equity Incentive
Plan. The registration statement will become effective automatically upon
filing. Shares issued under the Employee Stock Purchase Plan and the 2000
Equity Incentive Plan, after the filing of a registration statement on Form S-
8, and unexercised options as of the offering, may be sold in the open market,
subject, in the case of certain holders, to the Rule 144 limitations applicable
to affiliates, the above-referenced lock-up agreements and vesting restrictions
imposed by us.
In addition, following this offering, the holders of 14,386,945 shares of
outstanding common stock and warrants to purchase 396,081 shares of common
stock, or their transferees, will have rights to require us to register their
shares for future sale.
61
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below for whom Prudential Securities Incorporated, SG Cowen Securities
Corporation and Pacific Growth Equities, Inc. are acting as representatives. We
are obligated to sell, and the underwriters are obligated to purchase, all of
the shares offered on the cover page of this prospectus, if any are purchased.
Subject to certain conditions of the underwriting agreement, each underwriter
has severally agreed to purchase the shares indicated opposite its name:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Prudential Securities Incorporated....................................
SG Cowen Securities Corporation.......................................
Pacific Growth Equities, Inc..........................................
---------
Total............................................................... 4,500,000
=========
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to 675,000 additional shares from us. If any additional shares are purchased,
the underwriters will severally purchase the shares in the same proportion as
per the table above.
The representatives of the underwriters have advised us that the shares will
be offered to the public at the offering price indicated on the cover page of
this prospectus. The underwriters may allow to selected dealers a concession
not in excess of $ per share and such dealers may reallow a concession not
in excess of $ per share to certain other dealers. After the shares are
released for sale to the public, the representatives may change the offering
price and the concessions. The representatives have informed us that the
underwriters do not intend to sell shares to any investor who has granted them
discretionary authority.
We have agreed to pay to the underwriters the following fees, assuming both
no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares:
<TABLE>
<CAPTION>
Total Fees
-------------------------------------------
Fee Without Exercise of Full Exercise of
Per Share Over-Allotment Option Over-Allotment Option
--------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by us........... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $1.5 million in
expenses for this offering. We have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, or
contribute to payments that the underwriters may be required to make in respect
of these liabilities.
We, our officers and directors, and substantially all of our stockholders
have entered into lock-up agreements pursuant to which we and they have agreed
not to offer or sell any shares of common stock or securities convertible into
or exchangeable or exercisable for shares of common stock for a period of 180
days from the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities
may, at any time and without notice, waive the terms of these lock-up
agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for our common
stock. The public offering price, negotiated among us and the representatives,
is based upon various factors such as our financial and operating history and
condition, our prospects, the prospects for the industry we are in and
prevailing market conditions.
62
<PAGE>
Prudential Securities Incorporated, on behalf of the underwriters, may
engage in the following activities in accordance with applicable securities
rules:
. Over-allotments involving sales in excess of the offering size, creating
a short position. Prudential Securities Incorporated may elect to reduce
this short position by exercising some or all of the over-allotment
option.
. Stabilizing and short covering; stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in
the open market may also reduce the short position. These activities may
cause the price of the shares to be higher than would otherwise exist in
the open market.
. Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
. the Public Offers of Securities Regulations 1995,
. the Financial Services Act 1986, and
. the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).
We have asked the underwriters to reserve up to 150,000 shares of the common
stock offered by us for sale, at the initial public offering price, directly to
our directors, officers, employees and other business affiliates or related
third parties. The number of shares available for sale to the general public in
the offering will be reduced to the extent these individuals purchase the
reserved shares.
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
AdvisorSM, a full service brokerage firm program may view offering terms and a
prospectus online and place orders through their financial advisors.
LEGAL MATTERS
Certain matters with respect to the legality of the issuance of the common
stock offered hereby will be passed upon for us by Cooley Godward LLP, Palo
Alto, California. After giving effect to the conversion of all preferred stock,
an investment partnership of Cooley Godward LLP beneficially owns 27,458 shares
of our common stock. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Skadden, Arps, Slate, Meagher &
Flom (Illinois), Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for each of the three years in
the period ended December 31, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
63
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities & Exchange Commission a registration
statement on Form S-1 under the Securities Act that registers the shares of our
common stock to be sold in this offering. The registration statement, including
the attached exhibits and schedules, contains additional relevant information
about us and our capital stock. The rules and regulations of the Commission
allow us to omit certain information included in the registration statement
from this document.
In addition, we file reports, proxy statements and other information with
the Commission under the Securities Exchange Act of 1934. You may read and copy
this information at the following public reference rooms of the Commission:
Washington, D.C. New York, New York Chicago, Illinois
450 Fifth Street, N.W., 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the
operation of the public reference rooms by calling the Commission at 1-800-SEC-
0330.
The Commission also maintains an Internet website that contains reports,
proxy statements and other information about issuers, like Dendreon, who file
electronically with the Commission. The address of that site is
http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements, and make available to our stockholders
quarterly reports for the first three quarters of each year containing
unaudited interim consolidated financial information.
64
<PAGE>
DENDREON CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements 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 and Stockholders
Dendreon Corporation
We have audited the accompanying balance sheets of Dendreon Corporation 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 Dendreon Corporation as of
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.
Ernst & Young LLP
Seattle, Washington
February 18, 2000,
except as to Note 13, as to which the date is June , 2000
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion
of the stock split and the increase in authorized shares described in paragraph
2 of Note 13 to the financial statements.
Ernst & Young LLP
Seattle, Washington
May 20, 2000
F-2
<PAGE>
DENDREON CORPORATION
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31 Equity at
------------------ March 31, March 31,
1998 1999 2000 2000
-------- -------- --------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........ $ 6,883 $ 7,085 $ 8,495
Short-term investments........... 3,047 6,728 5,770
Accounts receivable (net
allowance of $25 in 1998 and
none in 1999)................... 319 833 838
Other current assets............. 159 556 1,272
-------- -------- -------
Total current assets............... 10,408 15,202 16,375
Property and equipment, net........ 1,134 1,499 1,556
Deposits and other assets.......... 496 674 1,034
-------- -------- -------
Total assets....................... $ 12,038 $ 17,375 $18,965
======== ======== =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
-----------------------------
Current liabilities:
Accounts payable................. $ 564 $ 377 1,243
Accrued liabilities.............. 666 757 773
Accrued compensation............. 361 505 360
Deferred revenue................. 1,969 2,234 2,083
Current portion of long term
debt............................ -- 1,033 1,291
Current portion of capital lease
obligations..................... 183 358 405
-------- -------- -------
Total current liabilities.......... 3,743 5,264 6,155
Deferred revenue, less current
portion........................... 4,002 2,960 2,792
Long term debt, less current
portion........................... -- 1,967 1,599
Capital lease obligations, less
current portion................... 531 832 896
Commitments
Stockholders' equity:
Convertible preferred stock,
$0.001 par value;
13,722,936 shares authorized
(10,000,000 shares authorized
pro forma), 9,009,524,
12,108,369 and 13,079,077 shares
issued and outstanding at
December 31, 1998 and 1999 and
March 31, 2000, respectively,
(no shares outstanding pro
forma), aggregate liquidation
preference of $54,306 at
December 31, 1999............... 9 12 13 $ --
Common stock, $0.001 par value;
19,910,000 shares authorized
(80,000,000 shares authorized
pro forma), 694,482, 1,111,058
and 1,484,595 shares issued and
outstanding at December 31, 1998
and 1999 and March 31, 2000,
respectively (15,871,540 shares
outstanding pro forma).......... 1 1 1 16
Additional paid-in capital....... 42,258 58,838 65,898 65,896
Deferred stock-based
compensation.................... (440) (1,715) (3,893) (3,893)
Accumulated deficit.............. (38,066) (50,784) (54,496) (54,496)
-------- -------- ------- --------
Total stockholders' equity......... 3,762 6,352 7,523 $ 7,523
-------- -------- ------- ========
Total liabilities and stockholders'
equity............................ $ 12,038 $ 17,375 $18,965
======== ======== =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
DENDREON CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------------- -------------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Collaborative and
license revenue....... $ 260 $ 1,612 $ 3,258 $ 612 $ 928
Grant revenue.......... 533 237 261 24 203
-------- -------- -------- -------- ----------
Total revenue........... 793 1,849 3,519 636 1,131
Operating expenses:
Research and
development........... 5,290 8,064 10,222 2,615 3,519
General and
administrative........ 2,894 2,893 6,110 1,250 1,386
-------- -------- -------- -------- ----------
Total operating
expenses............... 8,184 10,957 16,332 3,865 4,905
-------- -------- -------- -------- ----------
Loss from operations.... (7,391) (9,108) (12,813) (3,229) (3,774)
Interest income......... 267 361 414 90 218
Interest expense........ (47) (41) (351) (25) (156)
Other income (loss),
net.................... 8 (2) 32 -- --
-------- -------- -------- -------- ----------
Interest and other
income, net............ 228 318 95 65 62
-------- -------- -------- -------- ----------
Loss before income
taxes.................. (7,163) (8,790) (12,718) (3,164) (3,712)
Provision for income
taxes.................. -- 600 -- -- --
-------- -------- -------- -------- ----------
Net loss................ (7,163) (9,390) (12,718) (3,164) (3,712)
Deemed dividend upon
issuance of convertible
preferred stock........ -- -- (285) -- (4,110)
-------- -------- -------- -------- ----------
Net loss attributable to
common stockholders.... $ (7,163) $ (9,390) $(13,003) $ (3,164) $ (7,822)
======== ======== ======== ======== ==========
Basic and diluted net
loss per share......... $ (21.37) $ (14.92) $ (13.75) $ (4.46) $ (6.13)
======== ======== ======== ======== ==========
Shares used in
computation of basic
and diluted net loss
per share.............. 335,117 629,562 945,761 709,488 1,275,057
======== ======== ======== ======== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
DENDREON CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred Total
----------------- ---------------- Paid-in Stock-Based Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Deficit Equity
---------- ------ --------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997................... 4,764,345 $ 5 231,682 $-- $25,106 $ -- $(21,513) $ 3,598
Exercise of stock
options for cash...... -- -- 383,759 1 177 -- -- 178
Issuance of Series C
convertible preferred
stock for cash and
technology licenses at
$3.60 per share (net
of issuance costs of
$217)................. 3,308,179 3 -- -- 11,690 -- -- 11,693
Net loss............... -- -- -- -- -- -- (7,163) (7,163)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1997................... 8,072,524 8 615,441 1 36,973 -- (28,676) 8,306
Exercise of stock
options for cash...... -- -- 79,041 -- 47 -- -- 47
Issuance of Series D
convertible preferred
stock for cash at
$5.00 per share (net
of issuance costs of
$35).................. 937,000 1 -- -- 4,649 -- -- 4,650
Deferred stock-based
compensation.......... -- -- -- -- 589 (589) -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 149 -- 149
Net loss............... -- -- -- -- -- -- (9,390) (9,390)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1998................... 9,009,524 9 694,482 1 42,258 (440) (38,066) 3,762
Exercise of stock
options for cash...... -- -- 416,576 -- 217 -- -- 217
Issuance of Series E
convertible preferred
stock for cash at
$4.25 per share (net
of issuance costs of
$27).................. 3,098,845 3 -- -- 13,140 -- -- 13,143
Issuance of stock
warrants.............. -- -- -- -- 1,104 -- -- 1,104
Deferred stock-based
compensation.......... -- -- -- -- 2,119 (2,119) -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 844 -- 844
Net loss............... -- -- -- -- -- -- (12,718) (12,718)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1999................... 12,108,369 12 1,111,058 1 58,838 (1,715) (50,784) 6,352
Exercise options for
cash (unaudited)...... -- -- 373,537 -- 192 -- -- 192
Issuance of Series E
convertible preferred
stock for cash at
$4.25 per share (net
of issuance costs of
$15) (unaudited)...... 970,708 1 -- -- 4,109 -- -- 4,110
Deferred stock-based
compensation
(unaudited)........... -- -- -- -- 2,759 (2,759) -- --
Amortization of
deferred stock-based
compensation
(unaudited)........... -- -- -- -- -- 581 -- 581
Net loss (unaudited)... -- -- -- -- -- -- (3,712) (3,712)
---------- --- --------- ---- ------- ------- -------- --------
Balance, March 31, 2000
(unaudited)............ 13,079,077 $13 1,484,595 $ 1 $65,898 $(3,893) $(54,496) $ 7,523
========== === ========= ==== ======= ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
DENDREON CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
-------------------------- ----------------
1997 1998 1999 1999 2000
------- ------- -------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net loss................... $(7,163) $(9,390) $(12,718) $(3,164) $(3,712)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation............. 483 370 485 95 148
Non-cash stock-based
compensation expense.... -- 149 844 178 581
Non-cash interest
expense................. -- -- 38 -- 23
Non-cash research and
development expense..... 270 -- 190 -- --
Changes in assets and
liabilities:
Accounts receivable...... (424) 213 (514) (267) (5)
Other current assets..... (64) 49 (303) (158) (716)
Deposits and other
assets.................. 45 (393) (79) 15 (383)
Deferred revenue......... 264 5,707 (94) (199) (319)
Accounts payable......... 254 112 (187) (369) 866
Accrued liabilities and
compensation............ 199 256 235 (200) (129)
------- ------- -------- ------- -------
Net cash used in
operating activities.. (6,136) (2,927) (12,103) (4,069) (3,646)
Investing Activities:
Purchases of short-term
investments............... (7,461) -- (6,211) -- (5,728)
Maturities of short-term
investments............... -- 4,414 2,530 991 6,686
Purchases of property and
equipment................. (285) (658) (850) (137) (205)
------- ------- -------- ------- -------
Net cash provided by
(used in) investing
activities............ (7,746) 3,756 (4,531) 854 753
Financing Activities:
Proceeds from equipment
financing arrangement..... -- 800 700 -- 190
Proceeds from (payments on)
long term debt............ -- -- 3,000 -- (110)
Payments on capital lease
obligations............... (353) (205) (224) (40) (79)
Proceeds from sale of
preferred stock........... 11,423 4,650 13,143 -- 4,110
Proceeds from exercise of
stock options............. 177 47 217 11 192
------- ------- -------- ------- -------
Net cash provided by
(used in) financing
activities............ 11,247 5,292 16,836 (29) 4,303
------- ------- -------- ------- -------
Net increase (decrease) in
cash and cash equivalents... (2,635) 6,121 202 (3,244) 1,410
Cash and cash equivalents at
beginning of year........... 3,397 762 6,883 6,883 7,085
------- ------- -------- ------- -------
Cash and cash equivalents at
end of year................. $ 762 $ 6,883 $ 7,085 $ 3,639 $ 8,495
======= ======= ======== ======= =======
Supplemental Disclosure of
Cash Flow Information:
Cash paid during the period
for interest.............. $ 47 $ 41 $ 308 $ 25 $ 133
======= ======= ======== ======= =======
Cash paid during the period
for foreign income taxes.. $ -- $ 600 $ -- $ -- $ --
======= ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Information as of March 31, 2000 and for the three months ended
March 31, 1999 and 2000 is unaudited)
1. Organization and Summary of Significant Accounting Policies
Organization
Dendreon Corporation (the Company) was founded in 1992 as a Delaware-based
corporation headquartered in Mountain View, California. The Company relocated
to Seattle, Washington in 1999.
The Company is engaged in research and development of immunologically-based
therapeutic products for the treatment of cancer. The Company combines
expertise in immunology and antigen engineering with its proprietary cell
separation technologies to develop therapeutic vaccines that stimulate cancer-
fighting cells.
Unaudited Interim Financial Information
The unaudited interim financial statements reflect, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows for each period presented. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The results of the interim periods are not necessarily indicative
of future results.
Cash, Cash Equivalents, and Short-Term Investments
The Company considers investments in highly liquid instruments purchased
with a remaining maturity of 90 days or less to be cash equivalents. The
Company's cash equivalents and short-term investments consist principally of
commercial paper, money market securities, and certificates of deposit.
The Company has classified its entire investment portfolio as available-for-
sale. Available-for-sale securities are carried at fair value with unrealized
gains and losses reported as a separate component of stockholders' equity.
Unrealized gains and losses at December 31, 1998 and 1999 are not material,
based on the short-term nature of the Company's investments.
The cost of securities sold is based on the specific identification method.
There were no gross realized gains or losses on available-for-sale securities.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, which is
generally three to four years. Computers and equipment leased under capital
leases are amortized over the shorter of the useful lives of the related assets
or the lease term. Leasehold improvements are stated at cost and amortized
using the straight-line method over the remaining life of the lease or five
years, whichever is shorter.
Concentrations of Credit Risk
The Company is subject to concentration of credit risk, primarily from its
investments. Credit risk for investments is managed by purchase of investment
grade securities, A1/P1 for money market instruments and A or better for debt
instruments, and diversification of the investment portfolio among issuers and
maturities.
F-7
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Revenue Recognition
Non-refundable, up-front payments received in connection with collaborative
research and development agreements are deferred and recognized on a straight-
line basis over the relevant periods specified in the agreement, generally the
research term.
Revenue related to collaborative research with the Company's corporate
collaborators is recognized as research services are performed over the related
funding periods for each agreement. Under these agreements, the Company is
required to perform research and development activities as agreed or specified
in each agreement. The payments received under research collaboration
agreements are not refundable if the research effort is not successful.
Payments received in advance of the services provided are deferred and
recognized as revenue over the future performance periods.
Revenue related to grant agreements is recognized as related research and
development expenses are incurred.
Milestone and royalty payments are recognized in full at such time as the
specified milestone has been achieved. Revenue from product supply agreements
is recorded when the product is shipped or when all obligations under the
agreements are met.
Research and Development Expenses
Research and development expenses consist of costs incurred for proprietary
and collaborative research and development and costs incurred under product
supply agreements prior to product approval. These costs are expensed as
incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, in accounting for employee stock options rather than the
alternative fair value accounting allowed by Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation." Under APB
No. 25, compensation expense related to the Company's employee stock options is
measured based on the intrinsic value of the stock option. SFAS No. 123
requires companies that continue to follow APB No. 25 to provide pro forma
disclosure of the impact of applying the fair value method of SFAS No. 123. The
Company recognizes compensation expense for options granted to non-employees in
accordance with the provisions of SFAS No. 123 and the Emerging Issues Task
Force consensus Issue 96-18, "Accounting for Equity Instruments that are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services," which require using a Black-Scholes option pricing model and
remeasuring such stock options to the current fair market value as the
underlying option vests.
Deferred stock-based compensation consists of amounts recorded when the
exercise price of an option is lower than the subsequently determined fair
value of the underlying common stock on the date of grant. Deferred stock-based
compensation is amortized over the vesting period of the underlying option
using the graded vesting method.
F-8
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Net Loss Per Share
Basic and diluted net loss per share of common stock are presented in
conformity with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" (FAS 128). The Company has not issued or granted shares for nominal
consideration, as defined in the Securities and Exchange Commission Staff
Accounting Bulletin No. 98. The calculation of basic and diluted net loss per
share has been detailed in Note 8.
Fair Value of Financial Instruments
At December 31, 1999, the Company had the following financial instruments:
cash, cash equivalents, short-term investments, accounts receivable, accounts
payable, accrued liabilities, and long-term debt. The carrying value of cash,
cash equivalents, short-term investments, accounts receivable, accounts
payable, and accrued liabilities approximates their fair value based on the
liquidity of these financial instruments or based on their short-term nature.
The carrying value of debt approximates fair value based on the market interest
rates available to the Company for debt of similar risk and maturities.
Segment Reporting
As of January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
annual and interim reporting standards for a company's operating segments and
related disclosures about products, services, geographic areas, and major
customers. The Company has determined that it operates in only one segment, and
thus, the adoption of this statement had no impact on the Company financial
statements.
Comprehensive Loss
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. Total comprehensive
loss was not different than net loss.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). SAB 101 is based upon existing accounting rules and provided specific
guidance on how those accounting rules should be applied and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. SAB 101 will not have a material impact on the financial
position or results of operations of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for the year ending 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. The
Company believes the adoption of SFAS 133 will not have a material effect on
the financial statements, since it currently does not hold derivative
instruments or engage in hedging activities.
F-9
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Significant Agreements
In December 1998, the Company and Kirin Brewery Co., Ltd. (Kirin) entered
into a collaborative license agreement. The Company issued Kirin an exclusive
license to employ the Company's dendritic cell technology in the development of
therapeutic products for commercialization in Japan and certain other Asian
countries. The Company also granted Kirin an option to obtain an exclusive
license to commercialize in those countries, other products developed by the
Company. In exchange, Kirin has granted the company an option to obtain an
exclusive license to commercialize in North America any products developed by
Kirin under this agreement. The Company received a nonrefundable, upfront fee
of $5,000,000 on signing the agreement for the license rights granted under the
agreement. In February 1999, the Company and Kirin also entered into a joint
research agreement relating to dendritic cell product development. Under the
terms of the agreement, Kirin will fund a minimum of $1,350,000 per year for up
to five years. In July 1999, the Company and Kirin entered into a manufacturing
and supply agreement. Under the agreement, each party may supply the other with
antigens or other supplies. In 1999, the Company recognized $576,000 under this
agreement.
In December 1998, Kirin exercised an option under the agreement to receive
rights to the Company's prostate program. Kirin is solely responsible for the
development and clinical trials of the prostate program in Japan. Accordingly,
the Company recognized the $1 million option fee as revenue in 1998. The
Company will also receive royalties on sales of any products that utilize the
licensed technology.
Under the terms of the agreement, Kirin made a $2,000,000 equity investment
in the Company as part of the Series D offering (see Note 6). The Company has
the option, through December 31, 2000, to require Kirin to purchase up to
1,000,000 shares of stock at the most recent offering price, but not to exceed
$5,000,000 in the aggregate. In March 2000, the Company exercised its right to
require Kirin to purchase $5 million of the Company's common stock. The
purchase will close concurrent with the closing of the Company's initial public
offering at the initial public offering price.
During the years ended December 31, 1998 and 1999, the Company recognized
revenue of $1,083,000 and $2,915,000, respectively, related to the Kirin
agreements.
In March 1995, the Company entered into a one-year research agreement with
Stanford University (Stanford), in the field of cellular immunotherapy. The
agreement was subsequently extended through June 1997 under the same terms and
conditions as provided for in the original agreement. Under the terms of the
agreement, the Company performed specific research related to HIV-specific
allogenic cellular immunotherapy. In consideration, Stanford reimbursed the
Company for certain costs incurred in this effort. The Company recognized
revenue of $176,000 for the year ended December 31, 1997, related to this
agreement with associated costs approximating the amounts recognized as
revenue. In September 1996, the Company entered into two further research
agreements with Stanford University with initial terms of one year. The
agreements were extended through September 2000. Under the agreements, the
Company is being reimbursed for certain costs incurred in providing research
services to Stanford. During 1997, 1998, and 1999, the Company recognized
$357,000, $237,000, and $261,000 respectively, related to these agreements with
associated costs approximating the amounts recognized as revenue. At December
31, 1998 and 1999, the Company had receivables from Stanford amounting to
$78,000 and $65,000, respectively.
In August 1996, the Company entered into an agreement with BioTransplant
under which the Company granted BioTransplant a ten-year exclusive license to
use the Company's proprietary cell separation technology for use in combination
with solid organ transplantation. The Company received an up-front fee and will
receive royalties on future sales. In addition, BioTransplant is obligated to
annual minimum purchase amounts and payments to maintain exclusivity. During
the year ended December 31, 1997, 1998 and 1999, the Company recognized revenue
of $180,000, $210,000 and $150,000, respectively related to BioTransplant.
F-10
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Significant Agreements (continued)
In February 1997, the Company entered into a seven-year agreement with
Osiris under which the Company granted Osiris a non-exclusive license to use
the Company's proprietary cell separation technology for use in the separation
of mesenchymal stem cells. The Company received fees and will receive royalties
on future sales. During the year ended December 31, 1997, 1998 and 1999, the
Company recognized revenue of $47,000, $43,000 and $43,000, respectively,
related to the Osiris agreement.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31
-------------
1998 1999
------ ------
(in
thousands)
<S> <C> <C>
Furniture and office equipment.............................. $ 167 $ 295
Laboratory and manufacturing equipment...................... 2,048 2,382
Computer equipment.......................................... 250 328
Leasehold improvements...................................... 733 746
------ ------
3,198 3,751
Less accumulated depreciation and amortization.............. 2,064 2,252
------ ------
$1,134 $1,499
====== ======
</TABLE>
Property and equipment include assets under capitalized leases of $1,188,000
and $1,500,000 at December 31, 1998 and 1999, respectively. Accumulated
amortization related to assets under capital leases was $490,000 and $412,000
at December 31, 1998 and 1999, respectively.
4. Employee Notes Receivable
The Company has made loans to certain employees in connection with
individual employment agreements. The loans bear interest at annual rates from
4.7% to 5.5% per year and are either forgiven over five years based on
continued employment, or due immediately upon each employee's termination.
During the years ended December 31, 1997, 1998, 1999, the Company recognized
$38,000, $31,000, and $24,000, respectively, as an expense associated with
these notes. The balance at December 31, 1998 and 1999 was $15,000 and
$105,000, respectively, and have been classified in deposits and other assets
on the balance sheet.
5. Long-Term Debt and Capital Lease Obligations
In December 1997, the Company entered into a $1,000,000 lease line agreement
with a term of four years. The lease line was extended to $3,000,000 in
December 1999. As of December 31, 1999, $1,500,000 was advanced under the
agreement December 31, 1999, and $1,500,000 was available under the agreement.
All of the assets leased under the agreement were sold and leased back by the
Company. No gains or losses were recognized as a result of the sale or
leaseback. The Company has the right to repurchase the leased assets at the end
of the lease term for 10% of the original equipment cost. In connection with
the original lease line in 1997, the Company issued a warrant to purchase 9,167
shares of common stock exercisable for ten years at a price of $3.27 per share.
In connection with the lease extension in 1999, the Company issued a warrant to
purchase 3,300 shares of common stock exercisable for seven years at a price of
$4.55 per share. Both warrants were valued using the Black-Scholes valuation
method and the resulting fair values were determined to be insignificant.
F-11
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Long-Term Debt and Capital Lease Obligations (continued)
In June 1999, the Company obtained a term loan in an amount of $3,000,000
from a financial lender. The loan bears interest at an annual rate of 13.3% and
is collateralized by the Company's assets including receivables and equipment.
Interest-only payments shall be paid monthly for six months and 24 payments of
principal and interest are due monthly thereafter. In connection with the term
loan, the Company issued a warrant to purchase 85,800 shares of common stock at
an exercise price of $4.55. The warrant is exercisable for seven years from the
date of issuance. The Company has valued the warrant using the Black-Scholes
valuation method with the following assumptions: no dividend yield; expected
life of seven years; risk-free interest rate of 6.1%; and volatility of 0.75.
The fair value assigned to the warrant of $232,000 is being amortized using the
effective interest method, as additional interest expense over the term of the
loan.
Future principal payments under the term loan agreement and the future
minimum lease payments under capital lease obligations are as follows as of
December 31, 1999:
<TABLE>
<CAPTION>
Capital
Term Lease
Loan Obligations
------ ------------
(in thousands)
<S> <C> <C>
Year ending December 31:
2000.................................................. $1,033 $ 437
2001.................................................. 1,547 437
2002.................................................. 420 313
2003.................................................. -- 115
------ ------
Total payments......................................... 3,000 1,302
Less amount representing interest...................... -- 112
------ ------
Present value of payments.............................. 3,000 1,190
Less current portion of obligations.................... 1,033 358
------ ------
Long term portion of obligations....................... $1,967 $ 832
====== ======
</TABLE>
6. Stockholders' Equity
Convertible Preferred Stock
Convertible preferred stock designated and outstanding as of December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------------- Aggregate
Issued and Net Liquidation
Designated Outstanding Proceeds Preference
---------- ----------- -------- -----------
(in thousands, except share information)
<S> <C> <C> <C> <C>
Series A....................... 507,500 500,000 $ 9,964 $10,000
Series B....................... 4,264,375 4,264,345 14,459 14,542
Series C....................... 3,308,179 3,308,179 11,693 11,909
Series D....................... 937,000 937,000 4,650 4,685
Series E....................... 4,705,882 3,098,845 13,143 13,170
---------- ---------- ------- -------
13,722,936 12,108,369 $53,909 $54,306
========== ========== ======= =======
</TABLE>
In August 1999, the Company offered Series E preferred stock at a per-share
price of $4.25. Through December 31, 1999, 3,098,845 shares were issued, net of
$27,000 in issuance costs. The offering was completed in February 2000 when an
additional 970,708 shares of preferred stock were issued for proceeds of
$4,126,000, net of $15,000 in issuance costs.
F-12
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
At the date of issuance, the Company believed the per share price of $4.25
represented the fair value of the preferred stock. The subsequently determined
fair value of the Company's common stock ranged from $5.45 to $9.09 per share,
and was in excess of the fair value of the preferred stock. Accordingly, the
incremental fair value determined on the date of issuance for each closing of
Series E preferred stock, is deemed to be the equivalent of a preferred stock
dividend, limited to the extent of the proceeds from the issuance for each
closing. The Company recorded a deemed dividend of $285,000 for the year ended
December 31, 1999 by offsetting charges and credits to additional paid-in
capital, without any effect on total stockholders' equity. The amount increased
the loss attributable to common stockholders in the calculation of basic net
loss for the year ended December 31, 1999. An additional deemed dividend upon
the issuance of Series E preferred stock of $4,110,000 was recognized for the
three months ended March 31, 2000 for the 970,708 shares issued in February
2000.
Each share of Series A, B, C, D, and E preferred stock (preferred stock) is
entitled to voting rights equivalent to the number of shares of common stock
into which each share can be converted.
In the event of any voluntary or involuntary liquidation, the holders of
preferred stock will be entitled to receive, prior and in preference to any
distributions of any assets or surplus funds of the Company to the holders of
common stock, an amount equal to the original purchase price of the preferred
stock plus all declared and unpaid dividends, if any. If the assets and funds
to be distributed are insufficient to permit the payment of the full
preferential amounts to the preferred stockholders, the entire assets and funds
of the Company will be distributed ratably among the preferred stockholders in
proportion to the preferential amount each such stockholder is otherwise
entitled to receive.
In the event funds are sufficient to make a complete distribution to the
preferred stockholders as described above, the remaining assets of the Company
will be distributed to the holders of common stock and preferred stock pro rata
based on the number of shares of common stock held by each stockholder or the
number of shares of common stock into which shares of preferred stock are
convertible.
Shares are convertible, at the option of the holder, into one share of
common stock, subject to certain antidilution adjustments (see Note 13).
Conversion is automatic upon the closing of an underwritten public offering
registered under the Securities Act of 1933, which results in gross proceeds to
the Company of not less than $15,000,000 and a market capitalization for the
outstanding shares of common stock immediately following the offering of not
less than $40,000,000. Conversion is required upon election by a majority of
the holders of preferred stock, voting as a single class.
Warrants
In 1997, the Company issued a warrant to purchase 38,195 shares of common
stock in connection with an agreement for financial services provided to the
Company. The warrant was exercisable at a price of $3.27 per share for a ten-
year period. The Company has valued the warrant issued in 1997 using the Black-
Scholes valuation method with the following assumptions: no dividend yields,
expected life of 10 years, risk-free interest rate of 6% and volatility of 0.5.
The value of the warrant was determined to be insignificant, and consequently,
no expense has been recorded.
In February 1998, the Company issued an exclusive license for its cell
collection and isolation technology for the use in the field of hematopoetic
stem cell reconstitution of cancer patients. The Company received a non-
refundable, up front fee of $1,000,000. The agreement was terminated in October
1999. In connection with the termination, the Company issued a warrant to
purchase 275,000 shares of the Company's common stock for
F-13
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
nominal consideration. The warrant is exercisable for five years at an exercise
price of $4.55 per share. The warrant has been valued using the Black-Scholes
valuation method with the following assumptions: no dividend yield; expected
life of five years; risk-free interest rate of 6.1%; and volatility of 0.75. As
of the date of the termination, the Company had recognized $317,000 in revenue
under the agreement during 1998 and 1999. The fair value assigned to the
warrant of $873,000 has been offset against the remaining deferred revenue of
$683,000 and the remainder of $190,000 has been charged to research and
development expense.
Additional warrants for 112,831 shares of common stock and 7,500 shares of
Series A preferred stock were issued in 1995 and are still outstanding and
exercisable at December 31, 1999.
Stock Option Plans
In May 1996, the Company adopted a stock option plan (the 1996 Plan) and, as
of December 31, 1999, had reserved a total of 3,850,000 shares for issuance
thereunder. The options granted under the 1996 Plan may be either incentive
stock options or nonqualified stock options. Options granted under the 1996
Plan expire no later than 10 years from the date of grant. The option price
shall be at least 100% of the fair value on the date of grant for incentive
stock options, and no less than 85% of the fair value for nonqualified stock
options. If, at the time the Company grants an option, the optionee directly or
by attribution owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, the option price shall be at
least 110% of the fair value and shall not be exercisable more than five years
after the date of grant. The fair value of the Company's common stock is
determined by the board of directors based upon various factors, including the
progression of research and development, equity financings and estimated
proximity to a public offering of the Company's common stock. The options
generally become exercisable in increments over a period of four years from the
date of grant, with the first increment vesting after one year. Options may be
granted with different vesting terms from time to time.
At December 31, 1999, the Company had 8,224 options outstanding under a
prior stock option plan. The Company also had outstanding options to purchase
69,494 shares of common stock which were granted to founders in 1992 at $0.20
per share. These options were granted outside of the above plans.
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------- Three Months Ended
1997 1998 1999 March 31, 2000
------------------------- ------------------------- ------------------------- -------------------
Weighted
Shares Weighted- Shares Weighted- Shares Weighted- Shares Average
Under Average Under Average Under Average Under Exercise
Option Exercise Price Option Exercise Price Option Exercise Price Option Price
--------- -------------- --------- -------------- --------- -------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding--beginning
of period.............. 1,595,911 $0.48 1,494,988 $0.45 1,876,199 $0.54 1,888,873 $0.67
Options granted at fair
value.................. 323,949 0.47 -- -- -- -- -- --
Options granted at less
than fair value........ -- -- 625,900 0.75 665,720 0.95 429,009 2.16
Options exercised....... (383,759) 0.60 (79,041) 0.49 (416,576) 0.55 (373,537) 0.52
Options forfeited....... (41,113) 0.50 (165,648) 0.55 (236,470) 0.62 (15,082) 0.86
--------- --------- --------- ---------
Outstanding--end of
period................. 1,494,988 0.45 1,876,199 0.54 1,888,873 0.67 1,929,263 1.04
========= ========= ========= =========
Exercisable at end of
period................. 598,965 0.42 1,125,582 0.47 881,075 0.50 624,214 0.56
========= ========= ========= =========
Weighted-average fair
value of options
granted during the
period................. 0.08 1,84 4.34 9.32
</TABLE>
At December 31, 1999, there were 1,118,522 shares available for future grant
under the 1996 Plan.
F-14
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
Information regarding the weighted-average remaining contractual life and
weighted-average exercise price of options outstanding and options exercisable
at December 31, 1999 for selected price ranges is as follows:
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
----------------------------------- -----------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Contractual Exercise Exercise
Exercise Prices Shares Life (in years) Price Shares Price
--------------- --------- -------------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
$0.18............... 80,383 2.8 $0.18 80,383 $0.02
$0.46--$0.68........ 979,505 7.0 0.50 677,092 0.49
$0.73--$0.90........ 69,209 8.2 0.75 63,984 0.75
$0.91............... 726,776 9.1 0.91 59,616 0.91
$1.82............... 33,000 10.0 1.82 -- --
--------- -------
1,888,873 7.9 0.67 881,075 0.50
========= =======
</TABLE>
During the years ended December 31, 1998 and 1999, in connection with the
grant of certain options to employees, the Company recorded deferred stock-
based compensation of $589,000 and $2,119,000, respectively, representing the
difference between the exercise price and the subsequently determined fair
value of the Company's common stock on the date such stock options were
granted. The subsequently determined fair value of the Company's common stock
ranged from $0.91 to $3.32 in 1998, $3.36 to $7.27 in 1999, and $8.18 to $10.00
in the three months ended March 31, 2000. Deferred stock-based compensation is
being amortized on a graded vesting method. During the years ended December 31,
1998 and 1999, the Company recorded non-cash deferred stock-based compensation
expense of $149,000 and $844,000, respectively. Additional deferred stock-based
compensation of approximately $2,759,000 was recorded based on the subsequently
determined fair value of common stock options granted to employees during the
three months ended March 31, 2000.
Pro Forma Information
Pro forma information regarding net loss is required by SFAS No. 123 as if
the Company had accounted for its employee stock options under the fair value
method. The fair value of the Company's options was estimated at the date of
grant using the minimum value method with the following assumptions for 1997,
1998, and 1999 and no dividend yields; expected lives of the options of four
years; and risk-free interest rates of 5.5%, 6.0%, and 6.1%, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The following
table illustrates what net loss would have been had the Company accounted for
its stock options under the provisions of FAS 123.
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Pro forma net loss attributable to common
stockholders............................... $(7,364) $(9,420) $(13,082)
======= ======= ========
Pro forma net loss per share................ $(21.97) $(14.96) $ (13.83)
======= ======= ========
</TABLE>
F-15
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
Common Stock Reserved
As of December 31, 1999, common stock was reserved as follows:
<TABLE>
<S> <C>
Preferred stock................................................. 15,095,230
Preferred stock warrants........................................ 8,250
Common stock warrants........................................... 524,293
Common stock options............................................ 3,007,395
----------
18,635,168
==========
</TABLE>
7. Income Taxes
Due to operating losses and the inability to recognize the benefits
therefrom, there was no federal or state provision for income taxes. In 1998,
the Company was subject to a $600,000 withholding tax in Japan related to
certain payments received from Kirin.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $28,524,000. The Company also had federal
research and development tax credit carryforwards of approximately $1,209,000.
The net operating loss and credit carryforwards will expire at various dates
beginning on 2009 through 2012, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
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 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards....................... $ 8,236 $ 10,886
Deferred revenue....................................... 2,379 2,069
Research credits....................................... 723 1,209
Capitalized research and development................... 4,087 5,824
Other.................................................. 542 927
-------- --------
Total deferred tax assets.............................. 15,967 20,915
Valuation allowance.................................... (15,967) (20,915)
-------- --------
Net deferred tax assets................................ $ -- $ --
======== ========
</TABLE>
The net deferred tax asset has been fully offset by a valuation allowance.
The valuation allowance increased by $3,867,000 and $4,948,000 during the years
ended December 31, 1998 and 1999, respectively. Deferred tax assets relate
primarily to net operating loss carryforwards, research credits and capitalized
research and development costs.
F-16
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Net Loss Per Share
In accordance with FAS 128, the Company has determined the basic and diluted
net loss per share using the weighted-average number of shares of common stock
outstanding during the period. Pro forma basic and diluted net loss per share
of common stock 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 from the original date of
issuance using the if-converted method.
The following table presents the calculation of basic, diluted, and pro
forma basic and diluted net loss per share:
<TABLE>
<CAPTION>
March 31,
-------------------
1997 1998 1999 1999 2000
------- ------- ---------- ------- ----------
(in thousands except share and per share
information)
<S> <C> <C> <C> <C> <C>
Net loss attributable to
common shareholders........ $(7,163) $(9,390) $ (13,003) $(3,164) $ (7,822)
======= ======= ========== ======= ==========
Basic and diluted:
Weighted-average number of
shares used for basic and
diluted per share
amounts................... 335,117 629,562 945,761 709,488 1,275,057
======= ======= ========== ======= ==========
Basic and diluted net loss
per share.................. $(21.37) $(14.92) $ (13.75) $ (4.46) $ (6.13)
======= ======= ========== ======= ==========
Pro forma (unaudited):
Shares used above.......... 945,761 1,275,057
Pro forma adjustment to
reflect weighted effect of
assumed conversion of
convertible preferred
stock..................... 11,017,615 14,031,071
---------- ----------
Shares used in computing
pro forma basic and
diluted net loss per
share..................... 11,963,376 15,306,128
========== ==========
Pro forma basic and diluted
net loss per share........ $ (1.09) $ (0.51)
========== ==========
</TABLE>
The Company has excluded all convertible preferred stock and outstanding
stock options from the calculation of diluted loss per common share because all
such securities are antidilutive for the periods presented. The total number of
shares excluded from the calculations of diluted net loss per common share,
prior to the application of the treasury stock method for options, was
10,468,348, 11,868,158, and 15,662,818 for the years ended December 31, 1997,
1998, and 1999, respectively.
9. Lease and Rental Commitments
In July 1993, the Company leased a facility in Mountain View, California
under a noncancelable operating lease. The lease term is eight years, and the
Company has the option to extend the lease term for one five-year period. Terms
of renewal are to be negotiated at the time of exercising the renewal option.
The Company has subleased a portion of this facility under a lease expiring in
June 2001.
In October 1998, the Company entered into a lease agreement for a facility
in Seattle, Washington under a noncancelable operating lease. The lease term is
ten years and the Company has the option to extend the lease term for two five-
year periods with the same terms and conditions except for rent, which adjusts
to market rate. The Company has subleased a portion of this facility under a
lease expiring March 2004. The lessor has also provided the Company a tenant
improvement allowance of up to $3.5 million. At December 31, 1999, the Company
had expended or committed $2.4 million, which will be repaid monthly as an
addition to the base rent expense over the term of the lease, with interest at
12.5% per year.
F-17
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Lease and Rental Commitments (continued)
Sublease rental income is accounted for as a deduction of rent expense. Rent
expense for the years ended December 31, 1997, 1998, and 1999 was $495,000,
$495,000, and $3,162,000, respectively, which is net of sublease rental income
of $0, $0, and $561,000, respectively.
Future minimum lease payments under noncancelable operating leases and
future minimum rentals to be received under noncancelable subleases at December
31, 1999, are as follows:
<TABLE>
<CAPTION>
Operating Noncancelable
Leases Subleases
--------- -------------
(in thousands)
<S> <C> <C>
Year ending December 31:
2000.............................................. $ 2,191 $ 844
2001.............................................. 2,108 605
2002.............................................. 1,872 394
2003.............................................. 1,872 404
2004.............................................. 1,872 101
Thereafter........................................ 8,478 --
------- ------
Total minimum lease payments....................... $18,393 $2,348
======= ======
</TABLE>
10. Related-Party Transactions
Two founders are providing consulting services to the Company. The Company
has the right to terminate these contracts at any time. The Company incurred
$150,000, $132,000 and $120,000 in consulting fees during the years ended
December 31, 1997, 1998, and 1999, respectively, under these agreements.
11. Employee Benefit Plan
The Company has a 401(k) plan for those employees who meet eligibility
requirements. Eligible employees may contribute up to 20% of their eligible
compensation, subject to IRS limitations. Company contributions to the plans
are discretionary as determined by the Board of Directors. There were no
employer contributions in 1997, 1998, or 1999.
The Company started a Flexible Benefit Plan in December 1999 for eligible
employees to defer their pretax earnings to pay for certain kinds of benefits
and expenses. There were no significant expenses for the year ended December
31, 1999.
12. Major Customers
Revenues from the following customers represented greater than 10% of total
revenues:
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 67% 13% 7%
Customer B.................................................. -- 59% 83%
Customer C.................................................. 23% 11% 4%
Customer D.................................................. -- 14% 4%
</TABLE>
F-18
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
13. Subsequent Events
Initial Public Offering
On March 1, 2000, the board of directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is closed under the terms presently
anticipated, all of the outstanding preferred stock will automatically convert
into 14,386,945 shares of common stock. Unaudited pro forma stockholders'
equity, as adjusted for the assumed conversion of the preferred stock, is set
forth on the accompanying balance sheet.
On May 20, 2000, the board of directors approved, subject to stockholder
consent, a 1.1-for-1 stock split of the common stock of the Company and an
increase in the number of authorized shares of common stock to 19,910,000. This
stock split and increase in authorized shares will be effected prior to the
effectiveness of the Company's initial public offering. The conversion ratio of
the preferred stock will simultaneously be adjusted to 1.1-for-1. The number of
shares of common stock and applicable per share information presented in the
accompanying financial statements has been restated to reflect the stock split.
On March 1, 2000, the board of directors approved an increase in the
authorized number of shares of common stock to 80,000,000 and of preferred
stock to 10,000,000. The increase in the authorized number of shares was
approved by the stockholders of the Company on May 1, 2000 and will be
effective upon the closing of the initial public offering.
2000 Equity Incentive Plan
On March 1, 2000, the board of directors adopted and the stockholders
approved on May 1, 2000, the 2000 Equity Incentive Plan (the 2000 Plan), which
amends and restates the 1996 Plan. A total of 4,400,000 shares of common stock
have been authorized and reserved for issuance under the 2000 Plan, an increase
of 550,000 shares over that previously authorized under the 1996 Plan. Each
year, the number of shares reserved for issuance under the 2000 Plan will
automatically be increased by the least of (i) 5% of the total number of shares
of the Company's common stock then outstanding, (ii) 550,000 shares, or (iii) a
number to be determined by the Company's Board of Directors.
Employee Stock Purchase Plan
Effective upon the completion of the initial public offering, the Company
will implement the 2000 Employee Stock Purchase Plan (the Purchase Plan), which
was approved by the board of directors on March 1, 2000 and approved by the
stockholders on May 1, 2000. A total of 1,485,000 shares of common stock have
been reserved for issuance under the Purchase Plan. Each year, the number of
shares reserved for issuance under the Purchase Plan will automatically be
increased by the least of (i) 1% of the total number of shares of the Company's
common stock then outstanding, (ii) 440,000 shares, or (iii) a number
determined by the Company's Board of Directors.
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 common stock is purchased under the Purchase Plan is equal
to 85% of the lower of the fair market value of the common stock at the
commencement date of each offering period or the relevant purchase date.
F-19
<PAGE>
- -------------------------------------------------------------------------------
Until , 2000, all dealers effecting transactions in these securities,
whether or not participatingin this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers todeliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- -------------------------------------------------------------------------------
[LOGO OF DENDREON CORPORATION]
Prudential Vector Healthcare
a unit of Prudential Securities
SG Cowen
Pacific Growth Equities, Inc.
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC registration fee............................................. $ 26,400
NASD fee......................................................... 10,500
Nasdaq National Market listing fee............................... 95,000
Printing and engraving expenses.................................. 300,000
Legal fees and expenses.......................................... 600,000
Accounting fees and expenses..................................... 300,000
Blue sky fees and expenses....................................... 5,000
Transfer agent fees.............................................. 10,000
Miscellaneous expenses........................................... 153,100
----------
Total.......................................................... $1,500,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933
(the "Act"). Dendreon's bylaws provides for mandatory indemnification of its
directors and officers and permissible indemnification of employees and other
agents to the maximum extent not prohibited by the Delaware General Corporation
Law. Dendreon's certificate of incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty as directors to Dendreon and its stockholders.
This provision in the certificate of incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to Dendreon for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. Dendreon has entered
into indemnification agreements with its officers and directors, a form of
which is attached as Exhibit 10.1, hereto and incorporated herein by reference.
The indemnification agreements provide Dendreon's officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law. We maintain liability insurance for its directors and
officers. Reference is also made to Section of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of
Dendreon against certain liabilities and Section 9.8 of the Fourth Amended and
Restated Stockholders' Rights Agreement contained in Exhibit 10.15 hereto,
indemnifying certain of Dendreon's stockholders, including controlling
stockholders, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
(a) The following securities of the Registrant have been sold or issued by
the Registrant during the past three years without registration under the
Securities Act of 1933, as amended (the "Securities Act"). Securities issued
prior to September 4, 1997 were issued under the Registrant's former name
"Activated Cell Therapy, Inc."
(1) In June, July and August 1997, the Registrant issued and sold in a
private offering an aggregate of 3,308,179 shares of Series C Preferred
Stock at $3.60 per share to 30 investors, including Vulcan Ventures, Inc.,
affiliates of Sanderling Ventures, Kummell Investments Limited, HealthCare
Ventures, Shaw Venture Partners and other accredited investors. The net
aggregate consideration was $11,909,444.
II-1
<PAGE>
(2) In connection with the Series C Private Placement, 625 shares of the
Registrant's Series C Preferred Stock were issued to Shipley Raidy Capital
Partners, L.P. in satisfaction of finder's fees.
(3) In connection with the Series C Private Placement, a warrant to
purchase 38,195 shares of the Registrant's common stock at an exercise
price of $3.27 per share was issued to John F. Wong in satisfaction of
finder's fees.
(4) In December 1997, the Registrant issued a warrant to purchase 9,167
shares of the Registrant's common stock at an exercise price of $3.27 per
share to Transamerica Business Credit Corporation in connection with an
equipment lease agreement between the Registrant and Transamerica Business
Credit Corporation.
(5) In July 1998, the Registrant issued and sold in a private offering
an aggregate of 937,000 shares of Series D Preferred Stock at $5.00 per
share to eight investors, including Kirin Brewery Co., Ltd., Vulcan
Ventures, Inc., New York Life Insurance Company, Shaw Venture Partners and
other accredited investors. The net aggregate cash consideration was
$4,685,000.
(6) In March 1999, the Registrant issued a warrant to purchase 3,300
shares of its common stock at an exercise price of $4.55 per share to
Transamerica Business Credit Corporation in connection with an equipment
lease agreement between the Registrant and Transamerica Business Credit
Corporation.
(7) In August 1999, the Registrant issued a warrant to purchase 85,800
shares of its common stock at an exercise price of $4.55 per share to TBCC
Funding Trust II in connection with a loan agreement between the Registrant
and Transamerica Business Credit Corporation.
(8) In October 1999, the Registrant issued a warrant to purchase 275,000
shares of its common stock at an exercise price of $4.55 per share to
Fresenius AG in connection with the termination of a license agreement
between the Registrant and Fresenius AG.
(9) From September 1999 to February 2000, the Registrant issued and sold
in a private offering an aggregate of 4,069,553 shares of Series E
Preferred Stock at $4.25 per share to 14 investors, including Vulcan
Ventures, Inc., HealthCare Ventures, Kummell Investments Limited, New York
Life Insurance Company, Sanderling Venture Partners, Shaw Venture Partners
and other accredited investors. The net aggregate cash consideration was
$17,295,600.
(10) From March 10, 1997 to March 31, 1997, the Registrant granted
options to purchase an aggregate of 1,650 shares of common stock at an
exercise price of $0.46 per share to its employees and officers, pursuant
to its 1996 Equity Incentive Plan.
(11) From September 2, 1997 to November 17, 1997, the Registrant granted
options to purchase an aggregate of 51,150 shares of common stock at an
exercise price of $0.49 per share to its employees and officers and an
aggregate of 22,000 shares of common stock at an exercise price of $0.49
per share to its consultants and directors, pursuant to its 1996 Equity
Incentive Plan.
(12) From December 15, 1997 to February 2, 1998, the Registrant granted
options to purchase an aggregate of 348,150 shares of common stock at an
exercise price of $0.68 per share to its employees and officers, pursuant
to its 1996 Equity Incentive Plan.
(13) From March 2, 1998 to May 13, 1998, the Registrant granted options
to purchase an aggregate of 61,050 shares of common stock at an exercise
price of $0.75 per share to its employees and officers and an aggregate of
66,000 shares of common stock at an exercise price of $0.75 per share to
its consultants and directors, pursuant to its 1996 Equity Incentive Plan.
(14) From August 13, 1998 to December 1, 1999, the Registrant granted
options to purchase an aggregate of 725,120 shares of common stock at an
exercise price of $0.91 per share to its employees and officers and an
aggregate of 62,700 shares of common stock at an exercise price of $0.91
per share to its consultants and directors, pursuant to its 1996 Equity
Incentive Plan.
(15) From December 13, 1999 to March 1, 2000, the Registrant granted
options to purchase an aggregate of 354,200 shares of common stock at an
exercise price of $1.82 per share to its employees and
II-2
<PAGE>
officers and an aggregate of 52,800 shares of common stock at an exercise
price of $1.82 per share to its consultants and directors, pursuant to its
1996 Equity Incentive Plan.
(16) From March 1, 2000 to March 31, 2000, the Registrant granted
options to purchase an aggregate of 38,500 shares of common stock at an
exercise price of $4.55 per share to its employees.
(17) On March 13, 2000, the Registrant granted options to purchase an
aggregate of 16,500 shares of common stock at an exercise price of $4.55
per share to a director.
(18) From April 1, 2000 to April 30, 2000, the Registrant granted
options to purchase an aggregate of 22,550 shares of common stock at an
exercise price of $4.55 per share to its employees.
(19) From May 1, 2000 to May 15, 2000, the Registrant granted options to
purchase an aggregate of 7,700 shares of common stock at an exercise price
of $4.55 per share to its employees.
(20) On May 6, 2000, the Registrant granted options to purchase an
aggregate of 13,200 shares of common stock at an exercise price of $4.55
per share to two directors.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The sales and issuances of the above securities were deemed to be exempt
from registration under the Securities Act in reliance upon Section 4(2) of the
Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensation benefit
plans and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had adequate access, through their relationships with us, to information about
Dendreon.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation filed with the
Delaware Secretary of State on September 3, 1999.
3.2*** Form of Amended and Restated Certificate of Incorporation to be
effective on the closing of the offering made pursuant to the
Registration Statement.
3.3** Bylaws.
4.1 Specimen Common Stock certificate.
5.1* Opinion of Cooley Godward L.L.P.
10.1** Form of Indemnity Agreement between the Registrant and each of its
directors and certain of its officers.
10.2** 2000 Equity Incentive Plan.
10.3** 2000 Employee Stock Purchase Plan.
10.4** Fourth Amended and Restated Stockholders' Agreement, dated September
3, 1999, between the Registrant and certain holders of the
Registrant's securities.
10.5** Series D Preferred Stock Purchase Agreement, dated July 10, 1998.
10.6** Series E Preferred Stock Purchase Agreement, dated September 3, 1999.
10.7** Registration Rights and Shareholder's Agreement, dated October 18,
1999, between the Registrant and Fresenius AG.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.8** Warrant to purchase 250,000 shares of common stock issued by the
Registrant to Fresenius AG, dated October 18, 1999.
10.9** Letter dated September 3, 1998 regarding employment arrangement of
Christopher S. Henney and David L. Urdal.
10.10** Lease Agreement, dated October 27, 1992 and commencing July 1, 1993,
between the Registrant and Vanni Business Park General Partnership.
10.11** Lease Agreement, dated July 31, 1998, between the Registrant and
ARE-3005 First Avenue, LLC.
10.12** Loan and Security Agreement, dated July 30, 1999, between the
Registrant and Transamerica Business Credit Corporation.
10.13** Amended and Restated Master Lease Agreement, dated May 28, 1999,
between the Registrant and Transamerica Business Credit Corporation.
10.14** Second Amendment to Master Lease Agreement, dated January 31, 2000,
between the Registrant and Transamerica Business Credit Corporation.
10.15+*** Collaborative License Agreement, dated December 10, 1998, between
the Registrant and Kirin Brewery Co., Ltd.
10.16+** Research and License Agreement, dated February 1, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.17+** Manufacturing and Supply Agreement, dated July 27, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.18+** Joint Commercialization Agreement, dated February 1, 2000, between
the Registrant and Kirin Brewery Co., Ltd.
10.19 Form of Common Stock Purchase Agreement between the Registrant and
Kirin Brewery, Co., Ltd.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Cooley Godward L.L.P. (see Exhibit 5.1).
24.1** Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
** Previously filed
*** Previously filed and filed herewith
+ Confidential treatment requested
(b) Financial statement schedule
All financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the Registrant or the related notes to the financial statements.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 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, 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 Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the 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) That for the purpose of determining any liability under the 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Dendreon Corporation and
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Seattle, King County, State of Washington, on this 22nd day of May, 2000.
Dendreon Corporation
*
By: _________________________________
Christopher S. Henney, Ph.D.,
D.Sc.
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive May 22, 2000
______________________________________ Officer and Director
Christopher S. Henney, Ph.D., D.Sc. (Principal Executive
Officer)
/s/ Martin A. Simonetti Chief Financial Officer May 22, 2000
______________________________________ (Principal Financial and
Martin A. Simonetti Accounting Officer)
* Chairman of the Board of May 22, 2000
______________________________________ Directors
William Crouse
* Director May 22, 2000
______________________________________
Gerardo Canet
* Director May 22, 2000
______________________________________
Timothy Harris, Ph.D.
* Director May 22, 2000
______________________________________
Ruth Kunath
* Director May 22, 2000
______________________________________
Mark P. Carthy
* Director May 22, 2000
______________________________________
Lowell E. Sears
* Director May 22, 2000
______________________________________
Ralph Shaw
* Director May 22, 2000
______________________________________
David L. Urdal, Ph.D.
* Director May 22, 2000
______________________________________
Douglas Watson
/s/ Martin A. Simonetti
*By: _________________________________
Martin A. Simonetti
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation filed with the
Delaware Secretary of State on September 3, 1999.
3.2*** Form of Amended and Restated Certificate of Incorporation to be
effective on the closing of the offering made pursuant to the
Registration Statement.
3.3** Bylaws.
4.1 Specimen Common Stock certificate.
5.1* Opinion of Cooley Godward L.L.P.
10.1** Form of Indemnity Agreement between the Registrant and each of its
Directors and certain of its officers.
10.2** 2000 Equity Incentive Plan.
10.3** 2000 Employee Stock Purchase Plan.
10.4** Fourth Amended and Restated Stockholders' Agreement, dated September
3, 1999, between the Registrant and certain holders of the
Registrant's securities.
10.5** Series D Preferred Stock Purchase Agreement, dated July 10, 1998.
10.6** Series E Preferred Stock Purchase Agreement, dated September 3,
1999.
10.7** Registration Rights and Shareholder's Agreement, dated October 18,
1999, between the Registrant and Fresenius AG.
10.8** Warrant to purchase 250,000 shares of common stock issued by the
Registrant to Fresenius AG, dated October 18, 1999.
10.9** Letter dated September 3, 1998 regarding employment arrangement of
Christopher S. Henney and David L. Urdal.
10.10** Lease Agreement, dated October 27, 1992 and commencing July 1, 1993,
between the Registrant and Vanni Business Park General Partnership.
10.11** Lease Agreement, dated July 31, 1998, between the Registrant and
ARE-3005 First Avenue, LLC.
10.12** Loan and Security Agreement, dated July 30, 1999, between the
Registrant and Transamerica Business Credit Corporation.
10.13** Amended and Restated Master Lease Agreement, dated May 28, 1999,
between the Registrant and Transamerica Business Credit Corporation.
10.14** Second Amendment to Master Lease Agreement, dated January 31, 2000,
between the Registrant and Transamerica Business Credit Corporation.
10.15+*** Collaborative License Agreement, dated December 10, 1998, between
the Registrant and Kirin Brewery Co., Ltd.
10.16+** Research and License Agreement, dated February 1, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.17+** Manufacturing and Supply Agreement, dated July 27, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.18+** Joint Commercialization Agreement, dated February 1, 2000, between
the Registrant and Kirin Brewery Co., Ltd.
10.19 Form of Common Stock Purchase Agreement between the Registrant and
Kirin Brewery Co., Ltd.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Cooley Godward LLP (see Exhibit 5.1).
24.1** Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
** Previously filed
*** Previously filed and filed herewith
+ Confidential treatment requested
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DENDREON CORPORATION
Dendreon Corporation, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
1. The original name of this corporation is Activated Cell Therapy, Inc
and the date of filing of the date of filing of its original Certificate of
Incorporation with the Secretary of State was August 14, 1992.
2. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 228, 242 and 245 of the Delaware General
Corporation Law, the Board of Directors of the corporation having adopted
resolutions setting forth the proposed Amended and Restated Certificate of
Incorporation, declaring its advisability and directing that it be submitted to
the stockholders of the corporation for their approval; the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted having consented in writing to
the adoption thereof [; and written notice of such adoption by the stockholders
without a meeting by less than unanimous written consent having been given to
those stockholders from whom such written consent was not received.]
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation by amending and restating the text of the Certificate of
Incorporation in full to read as follows:
I.
The name of this corporation is Dendreon Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is CT Corporations Systems.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
1
<PAGE>
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is ninety million
(90,000,000) shares. Eighty million (80,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($0.001). Ten million
(10,000,000) shares shall be Preferred Stock, each having a par value of one-
tenth of one cent ($0.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. Board of Directors. The management of the business and the
conduct of the affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full
2
<PAGE>
term of three years. At the third annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting. Notwithstanding the foregoing
provisions of this section, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
3. Removal of Directors.
a. Neither the Board of Directors nor any individual director
may be removed without cause.
b. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.
4. Vacancies.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B.
1. Subject to paragraph (h) of Section 42 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the voting
3
<PAGE>
stock of the corporation entitled to vote. The Board of Directors shall also
have the power to adopt, amend or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4
<PAGE>
In Witness Whereof, this Certificate has been subscribed this ____ day of
__________, 2000 by the undersigned who affirms that the statements made herein
are true and correct.
By:____________________________
Name:__________________________
Title:_________________________
5
<PAGE>
EXHIBIT 4.1
COMPANY LOGO
DENDREON CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
<TABLE>
<S> <C>
THIS CERTIFICATE IS TRANSFERABLE IN NEW SEE REVERSE FOR CERTAIN DEFINITIONS AND A STATEMENT AS TO THE
YORK, N.Y. AND RIDGEFIELD PARK, N.J. RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS ON TRANSFER
THIS CERTIFIES THAT CUSIP 24823Q 10 7
is the record holder of
</TABLE>
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
DENDREON CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
Chief Financial Officer and Treasurer President and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES. L.L.C.
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
<PAGE>
The Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Such requests should be made to the Corporation's Secretary at the principal
office of the Corporation.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act __________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
Shares of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated ______________________
<PAGE>
X
________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
By ____________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE>
Exhibit 10.15
COLLABORATIVE LICENSE AGREEMENT
BETWEEN
DENDREON CORPORATION
AND
KIRIN BREWERY CO., LTD.
[ * ] = 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 OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS....................................................... 2
1.1 "Affiliate"....................................................... 2
1.2 "Controlled"...................................................... 2
1.3 "Dendreon Antigen"................................................ 2
1.4 "Dendreon Improvement"............................................ 2
1.5 "Dendreon Know-How"............................................... 3
1.6 "Dendreon Patents"................................................ 3
1.7 "Dendreon Product"................................................ 3
1.8 "Dendreon Technology"............................................. 3
1.9 "Dendreon Territory".............................................. 3
1.10 "Dendritic Cell".................................................. 3
1.11 "Drug Approval Application"....................................... 4
1.12 "Field"........................................................... 4
1.13 "FTE"............................................................. 4
1.14 "Fully Burdened Manufacturing Costs".............................. 4
1.15 "Information"..................................................... 4
1.16 "Joint Territory"................................................. 4
1.17 "Kirin Antigen"................................................... 4
1.18 "Kirin/Dendreon Term Sheet"....................................... 5
1.19 "Kirin Improvements".............................................. 5
1.20 "Kirin Know-How".................................................. 5
1.21 "Kirin Patents"................................................... 5
1.22 "Kirin Product"................................................... 5
1.23 "Kirin Technology"................................................ 5
1.24 "Kirin Territory"................................................. 5
1.25 "Licensed Dendreon Product"....................................... 6
1.26 "Licensed Kirin Product".......................................... 6
</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.
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1.27 "Net Revenue"..................................................... 6
1.28 "NHI Price"....................................................... 6
1.29 "North America"................................................... 6
1.30 "Patent".......................................................... 7
1.31 "Patent Costs".................................................... 7
1.32 "Phase II"........................................................ 7
1.33 "Product"......................................................... 7
1.34 "Reagent"......................................................... 7
1.35 "Reasonable Efforts".............................................. 7
1.36 "Regulatory Approval"............................................. 7
1.37 "Separation Devices".............................................. 8
1.38 "Single Treatment"................................................ 8
1.39 "Sublicensee"..................................................... 8
1.40 "Steering Committee".............................................. 8
1.41 "Third Party Royalties"........................................... 8
1.42 "Third Party"..................................................... 8
ARTICLE 2 LICENSES AND RELATED RIGHTS....................................... 8
2.1 Licenses Granted to Kirin......................................... 8
2.2 Licenses Granted to Dendreon...................................... 10
2.3 Kirin Option to License Dendreon Products......................... 10
2.4 Dendreon Option to License Kirin Products......................... 12
2.5 Notice of Development............................................. 14
2.6 Trademark Rights.................................................. 14
ARTICLE 3 MANAGEMENT........................................................ 17
3.1 The Steering Committee............................................ 17
3.2 Steering Committee Meetings....................................... 18
3.3 Decision-Making and Issue Resolution.............................. 19
</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.
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.4 Research Efforts and Expenses..................................... 19
3.5 Other Research.................................................... 19
ARTICLE 4 DEVELOPMENT AND MARKETING IN THE JOINT TERRITORY.................. 19
4.1 Collaborative Development and Marketing........................... 19
ARTICLE 5 FEES AND ROYALTIES................................................ 20
5.1 Technology Transfer Fee........................................... 20
5.2 Royalties on Sales of Kirin Products.............................. 20
5.3 Royalties on Sales of Licensed Dendreon Products.................. 21
5.4 Royalties on Dendreon Sales of Licensed Kirin Products............ 22
5.5 Kirin Milestone Payments.......................................... 22
5.6 Dendreon Milestone Payments....................................... 22
5.7 Payment of Royalties.............................................. 23
5.8 Royalty Structure and Marketing Strategy.......................... 23
ARTICLE 6 EQUITY INVESTMENT BY KIRIN........................................ 24
6.1 Stock Purchase at IPO............................................. 24
6.2 Put Right......................................................... 24
6.3 No Double Purchase................................................ 25
ARTICLE 7 CONFIDENTIALITY................................................... 25
7.1 Confidentiality; Exceptions....................................... 25
7.2 Authorized Disclosure............................................. 26
7.3 Survival.......................................................... 26
ARTICLE 8 INTELLECTUAL PROPERTY............................................. 26
8.1 Ownership......................................................... 26
8.2 Prosecution and Maintenance of Patents by Dendreon; Abandonment... 26
8.3 Prosecution and Maintenance of Patents by Kirin; Abandonment...... 27
8.4 Defense and Settlement of Third Party Claims...................... 27
8.5 Third Party Royalties............................................. 27
</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.
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.6 Enforcement of Patent Rights...................................... 28
ARTICLE 9 REPRESENTATIONS AND WARRANTIES.................................... 29
9.1 Representations and Warranties.................................... 29
ARTICLE 10 REPORTS, RECORDS AND SAMPLES...................................... 29
10.1 Sharing of Information............................................ 29
10.2 Records of Net Revenue............................................ 30
10.3 Materials......................................................... 30
10.4 Publicity Review.................................................. 30
10.5 Publications...................................................... 30
ARTICLE 11 TERM AND TERMINATION.............................................. 31
11.1 Term.............................................................. 31
11.2 Termination for Breach............................................ 31
11.3 Surviving Rights.................................................. 32
11.4 Non-exclusive Licenses after Expiration........................... 32
ARTICLE 12 INDEMNIFICATION................................................... 32
12.1 Indemnification in Kirin Territory................................ 32
12.2 Indemnification in the Dendreon Territory......................... 33
ARTICLE 13 MISCELLANEOUS..................................................... 33
13.1 Assignment........................................................ 33
13.2 Retained Rights................................................... 33
13.3 Force Majeure..................................................... 33
13.4 Further Actions................................................... 34
13.5 No Trademark Rights............................................... 34
13.6 Notices........................................................... 34
13.7 Dispute Resolution................................................ 35
13.8 Waiver............................................................ 35
13.9 Severability...................................................... 35
</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.
iv
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
13.10 Ambiguities....................................................... 36
13.11 Entire Agreement.................................................. 36
13.12 Headings.......................................................... 36
</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.
v
<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 10.15
COLLABORATIVE LICENSE AGREEMENT
This Collaborative License Agreement (the "Agreement") is made and entered
into effective as of December, 1998 (the "Effective Date") by and between
Dendreon Corporation, a Delaware corporation having its principal place of
business at 291 North Bernardo Avenue, Mountain View, California, U.S.A.
("Dendreon"), and Kirin Brewery Co., Ltd., a corporation organized and existing
under the laws of Japan having its principal place of business at 10-1, Shinkawa
2-chome, Chuo-ku, Tokyo, Japan ("Kirin"). Dendreon and Kirin may be referred to
herein collectively as the "Parties" or individually as a "Party."
RECITALS
A. Dendreon has developed and owns certain proprietary technology relating
to the isolation and activation of dendritic and other antigen-presenting cells
with antigens of interest for use in human therapies, and Kirin possesses
research, development and marketing capabilities for pharmaceutical and other
medical products.
B. Kirin desires to obtain from Dendreon a license to such Dendreon
technology to develop and commercialize, in Japan and certain other Asian
countries, activated, including without limitation antigen-activated, dendritic
and other antigen-presenting cell products based on such technology, and an
option to obtain the exclusive license to commercialize in such countries
certain Dendreon antigen-presenting cell products that have or will enter into
clinical development during the term of this Agreement.
C. Dendreon desires to obtain from Kirin an option to obtain the exclusive
license to commercialize in North America any Kirin products that are developed
by Kirin under this Agreement based on the Dendreon technology.
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D. With regard to the research collaboration set forth in the
Kirin/Dendreon Term Sheet, Dendreon and Kirin will enter into a Research and
License Agreement consistent with the Kirin/Dendreon Term Sheet.
E. In addition, Dendreon and Kirin will enter into a Manufacturing and
Supply Agreement consistent with the Kirin/Dendreon Term Sheet, which will
establish the terms and conditions for the Parties' purchase and supply of
certain separation devices, reagents and proprietary antigens.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the following meanings as used in this Agreement:
1.1 "Affiliate" means, with respect to a particular Party, a person,
corporation or other entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For the purposes of this definition, "control" means the direct or
indirect ownership by a Party of at least fifty percent (50%) of the outstanding
voting securities of the controlled entity; provided, that in any country where
the law does not permit foreign equity ownership of at least fifty percent
(50%), then with respect to corporations organized under such country's laws,
"control" shall mean the direct or indirect ownership by a Party of outstanding
voting securities of such corporation at the maximum amount permitted by the law
of such country.
1.2 "Controlled" means, with respect to a particular item, material, or
intellectual property right, that a Party owns or has a license under such item,
material or intellectual property right and has the ability to grant to the
other Party access to and/or a license or sublicense under such item, material
or intellectual property right as provided for herein without violating the
terms of any agreement or other arrangement with, or the rights of, any Third
Party.
[*] = 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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1.3 "Dendreon Antigen" means an antigen that is claimed by a patent or
is otherwise covered by intellectual property rights that are Controlled by
Dendreon.
1.4 "Dendreon Improvement" means any improvement to platform
technologies in the Dendreon Know-How that relates to the Field and is made and
Controlled by Dendreon during the Agreement and prior to approval of the first
Kirin Product in Japan, or if later, the termination of the Research Program.
1.5 "Dendreon Know-How" means all Information that (a) is Controlled by
Dendreon on the Effective Date, and (b) relates to Dendritic Cell separation and
enrichment, antigens, antigen engineering for delivery of antigen to Dendritic
Cells, Dendritic Cell activation or loading with antigen and/or infusion of such
activated or loaded Dendritic Cells for use in human therapies, which includes,
without limitation, the Information summarized on Exhibit A, as amended from
time to time by Dendreon.
1.6 "Dendreon Patents" means the Patents and Patent applications that
(a) are Controlled by Dendreon during the term of the Agreement, and (b) claim
an invention in the Dendreon Know-How or Dendreon Improvements. Such Patents
existing as of the Effective Date are listed on Exhibit B, and Dendreon will use
reasonable efforts to amend such Exhibit B from time to time to reflect any
changes.
1.7 "Dendreon Product" means: (a) any therapeutic product comprising
Dendritic Cells that have been activated or loaded with a specific antigen,
engineered antigen or antigen gene, (including without limitation Dendreon
Antigen), for use in human therapy by infusion into a patient, which product has
been developed by Dendreon based on the Dendreon Technology; or (b) any service
provided by or on behalf of Dendreon to a patient that utilizes the Dendreon
Technology and involves isolation or preparation of Dendritic Cells, activation
or loading with specific antigen, engineered antigen or antigen gene, (including
without limitation Dendreon Antigen), and infusion of such activated or antigen
loaded Dendritic Cells into a patient. Further, the Parties may agree in writing
to amend and extend the definition of Dendreon Product as provided in Section
5.8.
[*] = 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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1.8 "Dendreon Technology" means the Dendreon Know-How, the Dendreon
Improvements and the Dendreon Patents, either collectively or any part thereof.
1.9 "Dendreon Territory" means all countries of the world and all
territories and possessions thereof, excluding all countries, territories and
possessions within the Kirin Territory and the Joint Territory.
1.10 "Dendritic Cell" means a human dendritic cell or other antigen-
presenting cell or other cells from which dendritic cells can be derived.
1.11 "Drug Approval Application" means an application for Regulatory
Approval required before commercial sale or use of a Product as a drug in a
regulatory jurisdiction.
1.12 "Field" means the discovery, development, manufacture, use and sale
of products that generally utilize Dendritic Cell separation, antigen
engineering, and antigen or antigen gene delivery to Dendritic Cells for use in
human therapies that are based on, comprise, utilize or are derived from the
Dendreon Technology. The foregoing products may have applications for other
human medical uses, and if Kirin demonstrates to Dendreon's reasonable
satisfaction that such other uses exist, then the Parties agree to negotiate in
good faith an amendment to the Agreement that extends the Field to cover such
additional uses, including such additional amendments as may be needed to
properly cover such products for royalty purposes.
1.13 "FTE" means work hours equivalent to the work performed by one full-
time employee working for one year (including normal vacation).
1.14 "Information" means any and all information and data of any kind,
including without limitation techniques, inventions, practices, methods,
knowledge, know-how, skill, experience, test data (including pharmacological,
toxicological and clinical test data), analytical and quality control data,
marketing, cost, sales and manufacturing data and descriptions, compositions,
and assays.
1.15 "Joint Territory" means the countries that are members of the
European Union, as such union is constituted at the applicable time.
[*] = 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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1.16 "Kirin Antigen" means an antigen that is claimed by a patent or is
otherwise covered by intellectual property rights that are Controlled by Kirin.
1.17 "Kirin/Dendreon Term Sheet" means that certain Term Sheet executed
by the Parties and dated as of June 30, 1998.
1.18 "Kirin Improvements" means all Information developed by or on behalf
of Kirin that (a) is Controlled by Kirin during the term of the Agreement and
prior to approval of the first Kirin Product in Japan, or if later, the
termination of the Research Program, and (b) comprises improvements or
modifications to platform technologies in the Dendreon Technology or their use.
1.19 "Kirin Know-How" means all Information developed by or Controlled by
or on behalf of Kirin that relates directly to a Kirin Product or its
manufacture or use, but excluding the Kirin Improvements.
1.20 "Kirin Patents" means all Patents and Patent applications that claim
any inventions in the Kirin Improvements or the Kirin Know-How, which Patents
shall be listed on Exhibit C promptly after filing, and Kirin will use
reasonable efforts to amend such Exhibit C from time to time to reflect any
changes.
1.21 "Kirin Product" means: (a) any therapeutic product developed by or
on behalf of Kirin based on, derived from or incorporating the Dendreon
Technology that comprises Dendritic Cells that have been activated or loaded
with a specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), for use in human therapy by infusion into a
patient; or (b) any service provided by or on behalf of Kirin to a patient that
involves isolation or preparation of Dendritic Cells, activation or loading of a
specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), and infusion of such activated or antigen loaded
Dendritic Cells into a patient, wherein such service is based on, utilizes,
comprises or is derived from the Dendreon Technology. The Parties may agree in
writing to amend and extend the definition of Kirin Product as provided in
Section 5.8.
[*] = 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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1.22 "Kirin Technology" means the Kirin Improvements, Kirin Know-How and
Kirin Patents, either collectively or any part thereof.
1.23 "Kirin Territory" means Japan, Australia, New Zealand, People's
Republic of China (including Hong Kong and Macao), Taiwan, South Korea, North
Korea, Mongolia, Vietnam, Laos, Cambodia, Thailand, Myanmar, Philippines,
Brunei, Singapore, Indonesia and Malaysia.
1.24 "Licensed Dendreon Product" shall have the meaning set forth in
Section 2.3(b).
1.25 "Licensed Kirin Product" shall have the meaning set forth in Section
2.4(b).
1.26 "Net Revenue" means the total revenue received by a Party for sale
or other disposition of a Product by such Party or an Affiliate or Sublicensee
of such Party to a Third Party less the following to the extent actually
incurred or allowed with respect to such sale or disposition: (i) reasonable
costs paid, if any, by the Party to a Third Party on account of apheresis
performed as part of or in association with the Product; (ii) discounts,
including cash discounts, or rebates, retroactive price reductions or allowances
actually allowed or granted from the billed amount; (iii) credits or allowances
actually granted upon claims, rejections or returns of Products, including
recalls, regardless of the Party requesting such; (iv) freight, postage,
shipping and insurance charges paid for delivery of Product, to the extent
billed; and (v) taxes, duties or other governmental charges levied on or
measured by the billing amount when included in billing, as adjusted for rebates
and refunds; provided, however, that with respect to sales of a particular Kirin
Product or Licensed Dendreon Product by Kirin or its Affiliate or Sublicensee in
Japan, the "total revenue received", as set forth above in the first line of
this definition, shall not in any event be less than the NHI Price established
for insurance reimbursement of Single Treatment, less the average amount charged
by the particular hospital purchaser of such Product for the same number of
apheresis services and infusion services needed for and performed for Single
Treatment where such averages are calculated including all apheresis services or
infusion services, as applicable, that were performed for any purpose during the
applicable period.
[*] = 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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1.27 "NHI Price" means the maximum sale price for a particular
pharmaceutical or medical price as established by the Japanese National Ministry
of Health and Welfare.
1.28 "North America" means the United States and all possessions and
territories thereof, Canada, Greenland, Mexico, Guatemala, Costa Rica, Belize,
Nicaragua, Honduras, El Salvador, Panama, Haiti, the Dominican Republic, the
Bahamas, Cuba and the British Virgin Islands.
1.29 "Patent" means (i) a valid and enforceable patent, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof; and (ii) to the extent valid and enforceable rights are granted by a
governmental authority thereunder, a patent application.
1.30 "Patent Costs" means the fees and expenses paid to outside legal
counsel and other Third Parties, and filing and maintenance expenses, incurred
in connection with the establishment, maintenance of rights under Patents
applicable to Products including the costs of patent interference proceedings.
1.31 "Phase II" means that portion of a clinical development program that
provides for additional assessment of safety and preliminary assessment of
efficacy of a product in human volunteers or patients, which is intended to
gather information to support the pivotal human clinical trials using such
product in a particular country. Any such clinical development program shall be
performed in accordance with the U.S.A. Federal Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder (including without limitation 21
CFR Part 312), as amended from time to time, or the comparable foreign laws and
regulations in the applicable country.
1.32 "Product" means a Kirin Product or a Dendreon Product.
1.33 "Reagent" means, with respect to a particular Licensed Dendreon
Product, any proprietary reagent of Dendreon (excluding any reagents contained
in a Separation Device) that is required for commercial manufacture and/or use
of such Licensed Dendreon 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.
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1.34 "Reasonable Efforts" shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life taking
into account the establishment of the product in the marketplace, the
competitiveness of the marketplace, the proprietary position of the product, the
regulatory structure involved, the profitability of the product and other
relevant factors.
1.35 "Regulatory Approval" means any approvals, licenses, registrations
or authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport or sale of Products in a regulatory jurisdiction.
1.36 "Separation Devices" means any Dendreon device, including all
containers and proprietary reagents comprising such device, that is intended for
use by Dendreon and its licensees for the isolation and purification of
Dendritic Cells for use in human therapy by activation or loading with specific
antigen, engineered antigen or antigen gene, and infusion into a patient.
1.37 "Single Treatment" means a single course of treatment of a patient
involving isolation of such patient's Dendritic Cells, or other preparation of
appropriate Dendritic Cells, activation or loading with specific antigen,
engineered antigen or antigen gene, and infusion of such Dendritic Cells into a
patient (which may involve multiple infusions over several months), as
determined by the Steering Committee.
1.38 "Sublicensee" shall mean any Third Party expressly licensed by a
Party to make and sell one or more Products. A Sublicensee shall not include
distributors or sales agents that do no more than purchase and resell finished
Products on behalf of a Party.
1.39 "Steering Committee" shall have the meaning set forth in Section
3.1.
1.40 "Third Party Royalties" means royalties payable to a Third Party in
respect of the sale of Kirin Products or Dendreon Products other than royalties
payable with respect to licenses entered into prior to 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.
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1.41 "Third Party" means any entity other than Dendreon or Kirin or an
Affiliate of Dendreon or Kirin.
ARTICLE 2
LICENSES AND RELATED RIGHTS
2.1 Licenses Granted to Kirin.
(a) Subject to the terms of this Agreement, Dendreon hereby
grants to Kirin an exclusive license to use the Dendreon Technology to develop,
use, make, have made, sell and offer for sale Kirin Products in the Kirin
Territory. Kirin may grant sublicenses to its Affiliates under the license
rights granted by Dendreon in the foregoing license for any permitted purpose
without Dendreon's prior written approval and may grant sublicenses under such
rights to Third Parties solely for sale (but not therapeutic development) of
Kirin Products in the Kirin Territory without Dendreon's prior written approval.
Additionally, Kirin and its Affiliates may conduct clinical development of
particular Kirin Products in the Dendreon Territory and Joint Territory so long
as Kirin obtains Dendreon's prior written approval of the location and clinical
study protocol of any such clinical work or study of each such Kirin Product,
such approval not to be unreasonably withheld, and such work is intended to
generate data to be used in obtaining Regulatory Approval of such Kirin Product
for manufacturing, marketing and sale in the Kirin Territory.
(b) Subject to the terms of this Agreement (including without
limitation Section 2.4 and Article 5), Dendreon hereby grants to Kirin an
exclusive (except in the Joint Territory) license under the Dendreon Technology,
with the right to sublicense, to make, have made, use, sell and offer for sale
any Kirin Product created that contains a Kirin Antigen. The foregoing license
grant shall apply in countries where there is a patent or other intellectual
property right Controlled by Kirin covering such Kirin Antigen. Specifically
excluded from the license rights granted under this subsection (b) are any
rights to make, have made, use, import, sell and offer for sale in North America
any Kirin Product for which Dendreon has exercised the Dendreon Option pursuant
to Section 2.4.
[*] = 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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(c) Subject to the terms of this Agreement, Dendreon hereby
grants to Kirin an exclusive license to use the Dendreon Technology to use,
make, have made, import, sell and offer for sale Licensed Dendreon Products
solely in the Kirin Territory. Kirin may grant sublicenses under the license
rights granted by Dendreon in the foregoing to its Affiliates and to Third
Parties solely for sale of Licensed Dendreon Products in the Kirin Territory
without Dendreon's prior written approval. Additionally, Kirin and its
Affiliates may conduct clinical development of specific Licensed Dendreon
Products in the Dendreon Territory and Joint Territory so long as Kirin obtains
Dendreon's prior written approval of the location and clinical study protocol of
any such clinical work or study of a Licensed Dendreon Product, such approval
not to be unreasonably withheld, and such work is intended to generate data to
be used in obtaining Regulatory Approval of such Licensed Dendreon Product for
marketing and sale in the Kirin Territory.
(d) Subject to the terms of this Agreement, Dendreon grants to
Kirin a non-exclusive license to use the Dendreon Technology to make, have made,
use, sell and offer for sale Kirin Products in the countries in the world
outside of the Kirin Territory, North America and the Joint Territory; provided,
however, that Kirin and Dendreon shall mutually agree in writing upon any
Sublicensees of Kirin under the foregoing rights to sell the Kirin Products in
any such countries or territories, such agreement not to be unreasonably
withheld.
(e) Subject to the terms of Section 5.8, and except as
otherwise provided in the Manufacturing and Supply Agreement, the license rights
granted in the subsections (a) through (d) above are subject to the following
express limitation (and to all other obligations and limitations in the
Agreement): Kirin obtains no license or rights to make or to practice any of the
Dendreon Technology to make Separation Devices, Reagents or any other devices or
products for use in the isolation or purification of Dendritic Cells or any
other cells. Kirin may purchase Separation Devices and Reagents only under the
terms of the Manufacturing and Supply Agreement. Kirin may use Separation
Devices to isolate Dendritic Cells only as part of preparing a Kirin Product or
Licensed Dendreon Product or performing a service comprising a Kirin Product or
Licensed Dendreon 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.
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2.2 Licenses Granted to Dendreon.
(a) Subject to the terms of this Agreement, Kirin hereby grants to
Dendreon an exclusive license in the Dendreon Territory, with the right to
sublicense, under the Kirin Improvements and the Kirin Patents that claim such
Kirin Improvements to develop, make, have made, use, import and sell Dendreon
Products.
(b) Subject to the terms of this Agreement, Kirin hereby grants to
Dendreon an exclusive license under the Kirin Technology to use, make, have
made, import, sell and offer for sale Licensed Kirin Products in North America.
Dendreon may grant sublicenses under the license rights granted by Kirin in the
foregoing to its Affiliates and to Third Parties solely for the sale of Licensed
Kirin Products in North America.
2.3 Kirin Option to License Dendreon Products.
(a) Subject to the terms of this Section 2.3 and Article 5, Dendreon
hereby grants to Kirin an exclusive option (the "Kirin Option") to obtain an
exclusive license, with the right to sublicense, to conduct clinical development
on and to commercialize specific Dendreon Products in the Kirin Territory. The
Kirin Option is exercisable by Kirin, with respect to any particular Dendreon
Product in clinical development by Dendreon or its Afiliate, at any time
following the commencement of such clinical development, but no later than one
hundred ten (110) days after Dendreon delivers to Kirin a report on early Phase
II clinical trial data for such Dendreon Product (the "Kirin Option Period").
The report shall be available within thirty (30) days after completion of early
Phase II clinical trials for such Dendreon Product. To exercise the Kirin Option
for a particular Dendreon Product in development, Kirin shall provide Dendreon
written notice of Kirin's election prior to the expiration of the applicable
Kirin Option Period. Notwithstanding the above, Kirin shall have the right to
negotiate for an extension of the Kirin Option Period applicable to a particular
Dendreon Product. In consideration of any such extension, if any, the Parties
will negotiate in good faith compensation to be paid to Dendreon.
(b) If Kirin properly exercises the Kirin Option for a particular
Dendreon Product, then such Dendreon Product shall thereafter be deemed a
"Licensed Dendreon Product" for
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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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purposes of this Agreement. Kirin shall be entitled, subject to compliance with
the other terms of the Agreement, to exercise the license rights granted under
Section 2.1(c) with respect to such Licensed Dendreon Product. Kirin shall use
Reasonable Efforts to develop and obtain Regulatory Approval in the Kirin
Territory for each Licensed Dendreon Product. Kirin shall pay all the
development and registration costs for all such Licensed Dendreon Products in
the Kirin Territory. Kirin shall use Reasonable Efforts to market and sell in
the Kirin Territory all Licensed Dendreon Products for which Regulatory Approval
in the Kirin Territory has been obtained.
(c) For each Dendreon Product in development during the term of the
Agreement, Dendreon agrees that it shall not grant any rights, interests, or
options to any Third Parties for the commercialization of such Dendreon Product
in the Kirin Territory until the earlier of: (i) the expiration of the Kirin
Option Period applicable to such Dendreon Product without Kirin having exercised
such Kirin Option; or (ii) Kirin's failure to use Reasonable Efforts to develop
and market such Dendreon Product in the Kirin Territory at any time commencing
one hundred eighty (180) days after Kirin's exercise of the Kirin Option; or
(iii) termination of the Agreement. If Kirin fails to exercise the Kirin Option
as to a particular Dendreon Product, Dendreon shall have the right to develop
and commercialize such Dendreon Product in the Kirin Territory. Further, if
Kirin fails to use Reasonable Efforts to develop and market a Licensed Dendreon
Product in the Kirin Territory at any time commencing one hundred eighty (180)
days after Kirin's exercise of the Kirin Option, Dendreon shall have the right
to develop and commercialize such Licensed Dendreon Product in the Kirin
Territory upon ninety (90) days notice from Dendreon; provided, however, that if
Kirin initiates Reasonable Efforts to develop and market such Licensed Dendreon
Product in the Kirin Territory within the ninety (90) day notice period and
continues thereafter to use Reasonable Efforts to develop and market such
Licensed Dendreon Product in the Kirin Territory, then Dendreon shall not obtain
such rights unless and until Kirin does not continue using such Reasonable
Efforts. Dendreon's right to commercialize Dendreon Products for which the Kirin
Option has expired shall be subject to the following: If Kirin has any ongoing
or current research, development or commercial project involving Dendritic Cell-
based therapy for the same tumor type as is the subject of treatment by such
Dendreon Product, and the goal of such project is the creation of a Kirin
Product, and Kirin has
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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previously identified such project to Dendreon prior to Dendreon's disclosure of
such Dendreon Product to Kirin, or has demonstrated the existence of such
project to Dendreon's reasonable satisfaction based on official notebook data
entries created prior to such disclosure, then Dendreon agrees not to develop
and market such Dendreon Product in the Kirin Territory, nor to grant to a Third
Party a license to develop and market such Dendreon Product in the Kirin
Territory, without obtaining Kirin's prior written consent. For clarity, the
requirement that Kirin use Reasonable Efforts in developing and commercializing
Licensed Dendreon Products does not necessarily require that Kirin expend such
efforts in every country in the Kirin Territory, so long as such efforts are
expended in each country where it is economically reasonable to do so.
2.4 Dendreon Option to License Kirin Products.
(a) Subject to the terms of this Section 2.4 and Article 5, Kirin
hereby grants to Dendreon an exclusive option (the "Dendreon Option") to obtain
an exclusive license, with the right to sublicense, to commercialize specific
Kirin Products in North America. The Dendreon Option is exercisable by Dendreon,
with respect to any particular Kirin Product in clinical development, at any
time following the commencement of such clinical development, but no later than
one hundred ten (110) days after Kirin delivers to Dendreon a report on early
Phase II clinical trial data for such Kirin Product (the "Dendreon Option
Period"). The report shall be available thirty (30) days after completion of
early Phase II clinical trials for such Kirin Product. To exercise the Dendreon
Option for a particular Kirin Product in development, Dendreon shall provide
Kirin written notice of Dendreon's election prior to the expiration of the
applicable Dendreon Option Period. Notwithstanding the above, Dendreon shall
have the right to negotiate for an extension of the Dendreon Option Period
applicable to a particular Kirin Product. In consideration of any such
extension, if any, the Parties will negotiate in good faith compensation to be
paid to Kirin.
(b) If Dendreon properly exercises the Dendreon Option for a
particular Kirin Product, then such Kirin Product shall thereafter be deemed a
"Licensed Kirin Product" for purposes of this Agreement. Dendreon shall be
entitled, subject to compliance with the other terms of the Agreement, to
exercise the license rights granted under Section 2.2(b) with respect
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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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to such Licensed Kirin Product. Dendreon shall pay all the development and
registration costs for all such Licensed Kirin Products in North America.
(c) For each Kirin Product in development during the term of the
Agreement, Kirin agrees that it shall not grant any rights, interests, or
options to any Third Parties for the commercialization of such Kirin Product in
North America until the earlier of: (i) the expiration of the Dendreon Option
Period applicable to such Kirin Product without Dendreon having exercised such
option; (ii) Dendreon's failure to use Reasonable Efforts to develop and market
such Kirin Product in North America at any time commencing one hundred eighty
(180) days after Dendreon's exercise of the Dendreon Option; or (iii)
termination of the Agreement. If Dendreon fails to exercise the Dendreon Option
as to a particular Kirin Product, Kirin shall have the right to develop and
commercialize such Kirin Product in North America. Further, if Dendreon fails to
use Reasonable Efforts to develop and market the respective Licensed Kirin
Product in North America at any time commencing one hundred eighty (180) days
after Dendreon's exercise of the Dendreon Option, Kirin shall thereafter have
the right to develop and commercialize such Kirin Product in North America, upon
ninety (90) days notice from Kirin; provided, however, that if Dendreon
initiates Reasonable Efforts to develop and market such Licensed Kirin Product
in North America within the ninety (90) day notice period and continues
thereafter to use Reasonable Efforts to develop and market such Licensed Kirin
Product in the North America, then Kirin shall not obtain such rights unless and
until Dendreon does not continue using Reasonable Efforts. Kirin's right to
commercialize Kirin Products for which the Dendreon Option has expired shall be
subject to the following: If Dendreon has any ongoing or current research,
development or commercial project involving Dendritic Cell-based therapy for the
same tumor type as is the subject of treatment by such Kirin Product, and the
goal of such project is the creation of a Dendreon Product, and Dendreon has
previously identified such project to Kirin prior to Kirin's disclosure of such
Kirin Product to Dendreon, or has demonstrated the existence of such project to
Dendreon's reasonable satisfaction based on official laboratory notebook data
entries created prior to such disclosure, then Kirin agrees not to develop and
market such Kirin Product in North America, nor to grant to a Third Party a
license to develop and market such Kirin Product in North America, without
obtaining Dendreon's prior written consent. For clarity, the requirement that
Dendreon use Reasonable Efforts in developing
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and commercializing Licensed Kirin Products does not necessarily require that
Dendreon expend such efforts in every country in North America, so long as such
efforts are expended in each country where it is economically reasonable to do
so.
2.5 Notice of Development. Upon reasonable request by Dendreon, Kirin
will provide Dendreon with Information regarding the Kirin Products that are in
clinical trials prior to Phase II. Upon reasonable request by Kirin, Dendreon
will provide Kirin with Information regarding the Dendreon Products that are in
clinical trials prior to Phase II.
2.6 Trademark Rights.
(a) License Grants.
(i) License to Dendreon. Subject to the limitations set forth
below, Kirin grants to Dendreon a non-exclusive, royalty-free license, with the
right to sublicense, to use any and all marks Kirin has adopted for use with
Kirin Products (the "Kirin Licensed Marks"), solely in connection with the
promotion and sale of Licensed Kirin Products in North America. Dendreon shall
not use Kirin Licensed Marks in connection with any other products or in any
other activities without prior written approval of Kirin.
(ii) License to Kirin. Subject to the limitations set forth
below, Dendreon grants to Kirin a non-exclusive, royalty-free license, with the
right to sublicense, to use any and all marks Dendreon has adopted for use with
the Dendreon Products (the "Dendreon Licensed Marks"), solely in connection with
the promotion and sale of Licensed Dendreon Products and Kirin Products in the
Kirin Territory. Kirin shall not use Dendreon Licensed Marks in connection with
any other products or activities without prior written approval of Dendreon.
(b) Additional Marks. The Parties may wish to extend this Agreement
to cover additional marks, including without limitation any marks for products
resulting from the Collaboration Program, which either Party may acquire and
desire to license to the other Party. The Parties agree that in such event, a
letter from either Party to the other Party specifying such additional marks
shall be sufficient to extend the applicable license granted herein, and all the
terms and conditions thereof, to such additional marks for the permitted
purposes.
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(c) Form of Use. Dendreon, its Affiliates and Sublicensees shall
use Kirin Licensed Marks only in the form(s) approved in writing by Kirin and
shall include where appropriate the designations (R) and (TM) and a statement
that Kirin Licensed Marks are the trademarks of Kirin Brewery Co., and other
proprietary notices as reasonably required by Kirin from time-to-time.
Similarly, Kirin, its Affiliates and Sublicensees shall use Dendreon Licensed
Marks only in the form(s) set forth on Exhibit D hereto or otherwise approved in
writing by Dendreon and shall include where appropriate the designations (R) and
(TM) and a statement that Dendreon Licensed Marks are the trademarks of Dendreon
Corporation, and other proprietary notices as reasonably required by Dendreon
from time-to-time. The Parties agree to comply with all applicable laws and
regulations pertaining to the proper use and designation of trademarks.
(d) Ownership of Licensed Marks.
(i) Ownership. Each Party acknowledges that it has no interest
in the other Party's Licensed Marks other than the license granted under this
Agreement and that each Party is, and will continue to be, the sole and
exclusive owner of all right, title and interest in its respective Licensed
Marks.
(ii) No Contest. Each Party agrees that it will not contest,
oppose or challenge the other Party's ownership of its Licensed Marks. Each
Party agrees that it will do nothing to impair the other Party's ownership or
rights in its Licensed Marks. In particular, neither Party will register or
attempt to register the other Party's Licensed Marks in any jurisdiction nor
oppose the other's registration of its Licensed Marks, alone or with other words
or designs, in any jurisdiction. If either Party uses, registers or applies to
register a licensed mark that violates its obligations under this section, such
Party agrees, at the other's request, to abandon the use of such mark and any
application or registration for such mark.
(iii) Adverse Use. Each Party shall notify the other Party of
any adverse use by a Third Party of the other Party's Licensed Marks or of a
mark or name confusingly similar to the other's Licensed Marks and agrees to
take no action with respect thereto except with the other's prior written
authorization. The Party that owns any infringed Licensed Marks may thereupon
take such action as it in its sole discretion deems advisable for
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the protection of its rights in and to its Licensed Marks, including allowing
the licensed Party to bring and prosecute a claim against such Third Party at
the licensed Party's expense. Each Party further agrees to provide full
cooperation with any legal or equitable action by the other Party to protect the
other's rights, title and interest in its Licensed Marks.
(e) Quality Control.
(i) Kirin's Obligations. The nature and quality of all goods
sold by Kirin, its Affiliates and Sublicensees in connection with Dendreon
Licensed Marks and all advertising and promotional uses and all other related
uses of Dendreon Licensed Marks by Kirin, its Affiliates and Sublicensees shall
conform to Dendreon's standards. Kirin further agrees to provide samples of
advertising and other promotional material bearing Dendreon Licensed Marks to
Dendreon for approval at least thirty (30) days before such materials are to be
distributed, displayed or otherwise used. Kirin, its Affiliates and Sublicensees
will not distribute, display or otherwise use such materials without Dendreon's
prior written approval, which approval shall not be unreasonably withheld.
(ii) Dendreon's Obligations. The nature and quality of all goods
sold by Dendreon, its Affiliates and Sublicensees in connection with Dendreon's
use of Kirin Licensed Marks and all advertising and promotional uses and all
other related uses of Kirin Licensed Marks by Dendreon, its Affiliates and
Sublicensees shall conform to Kirin's standards. Dendreon further agrees to
provide samples of advertising and other promotional material bearing Kirin
Licensed Marks to Kirin for approval at least thirty (30) days before such
materials are to be distributed, displayed or otherwise used. Dendreon, its
Affiliates and Sublicensees will not distribute, display or otherwise use such
materials without Kirin's prior written approval, which approval shall not be
unreasonably withheld.
(f) Confusingly Similar and/or Combination Marks.
(i) Kirin's Obligations. Kirin agrees that Kirin, its
Affiliates and Sublicensees will not adopt or use any other trademarks, words,
symbols, letters, designs or marks (i) in combination with Dendreon Licensed
Marks in a manner that would create
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combination marks or (ii) that would be confusingly similar to Dendreon Licensed
Marks, provided, however, that Kirin, its Affiliates and Sublicensees may use
Dendreon Licensed Marks with other marks or names if such other marks or names
are sufficiently separated from Dendreon Licensed Marks and sufficiently
distinctive to avoid the consumer impression that such other marks or their
owners are associated with Dendreon.
(ii) Dendreon's Obligations. Dendreon agrees that Dendreon, its
Affiliates and Sublicensees will not adopt or use any other trademarks, words,
symbols, letters, designs or marks (i) in combination with Kirin Licensed Marks
in a manner that would create combination marks or (ii) that would be
confusingly similar to Kirin Licensed Marks, provided, however, that Dendreon,
its Affiliates and Sublicensees may use Kirin Licensed Marks with other marks or
names if such other marks or names are sufficiently separated from Kirin
Licensed Marks and sufficiently distinctive to avoid the consumer impression
that such other marks or their owners are associated with Kirin.
ARTICLE 3
MANAGEMENT
3.1 The Steering Committee. Dendreon and Kirin agree to form, as of the
Effective Date, a committee to facilitate the research and development of Kirin
Products and Dendreon Products ("the Steering Committee"). The Steering
Committee shall be comprised of four (4) individuals, two (2) being Dendreon
employees appointed and replaced by Dendreon at its discretion and two (2) being
Kirin employees appointed and replaced by Kirin at its discretion. The size and
composition of the Steering Committee may be by mutual agreement of the Parties.
The Parties shall form the Steering Committee within twenty (20) days after the
Effective Date. The Steering Committee shall have the following authority and
obligations:
(a) To encourage and facilitate the ongoing cooperation of the
Parties in conducting the research and development of Kirin Products and
Dendreon Products;
(b) To establish and implement specific plans for accomplishing the
tasks and goals of the Parties as set forth in the Agreement;
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(c) To coordinate the communication, information exchange and
efforts of the Parties with respect to all matters under this Agreement; and
(d) To discuss and resolve, if possible, any issues or disputes that
arise under the Agrement.
3.2 Steering Committee Meetings. The Steering Committee shall act at
meetings held regularly with all members present, according to the following:
(a) The Steering Committee meetings shall take place at such times
and places as shall be determined by the Steering Committee but no less
frequently than once per six (6) months; it is expected that the meetings will
alternate between appropriate offices of each Party, or at such other convenient
locations as agreed;
(b) If requested by a Party, the Steering Committee may conduct a
particular meeting by telephone or video conference or other acceptable
electronic means, provided that all Steering Committee members attend such
meeting and can hear and communicate with all other members, and any decisions
made during such meeting are recorded in writing and confirmed by signature of
at least one of the Steering Committee members from each of the Parties;
(c) A Party may bring a reasonable number of additional
representatives, in a non-voting capacity, to attend appropriate Steering
Committee meetings, provided that such attendance is helpful to the Steering
Committee carrying out its tasks and obligations;
(d) Prior to each meeting, the designated chair of the Steering
Committee (which may vary during the term) shall circulate an agenda for the
meeting, and the Steering Committee shall keep minutes reflecting matters
discussed and the actions taken at the meeting, a copy of which shall be
provided to each Party; and
(e) The Steering Committee may act on a specific issue or matter
without a meeting if the Steering Committee members all agree as to such action
and such agreement is set forth in a written consent signed by all the members
of the Steering Committee.
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3.3 Decision-Making and Issue Resolution. All decisions of or actions
taken by the Steering Committee shall be by unanimous approval of all the
members of the Steering Committee or such subcommittee, and voting on any
matters shall be reflected in the minutes of the meeting at which the vote was
taken. If the Steering Committee fails to reach unanimous agreement on an issue
or matter needing resolution, the matter shall be referred for good faith
discussion and resolution by the appropriate senior executive officer of each
Party.
3.4 Research Efforts and Expenses. Each of the Parties will maintain
scientific staff, laboratories, offices and other facilities necessary to carry
out the tasks and obligations assigned to it pursuant to this Agreement. Each
party shall use Reasonable Efforts to conduct and complete such tasks and
obligations. Kirin will bear all of its own expenses incurred in connection
with research and development of Kirin Products and Licensed Dendreon Products
by Kirin in the Kirin Territory or in North America pursuant to Section 2.4(c).
Dendreon shall bear all of its own expenses incurred in connection with research
and development of Dendreon Products and Licensed Kirin Products by Dendreon in
the Dendreon Territory or in the Kirin Territory, pursuant to Section 2.3(c).
3.5 Other Research. Kirin acknowledges and agrees that nothing in this
Agreement shall prevent or otherwise hinder Dendreon from conducting, and
Dendreon shall retain full rights to conduct, its own independent research and
development work with respect to Dendreon Technology or any aspect thereof for
any use or purpose outside the Kirin Territory or any use or purpose outside the
Field in the Kirin Territory, and including conducting such research and
development work with or on behalf of Third Party partners.
ARTICLE 4
DEVELOPMENT AND MARKETING IN THE JOINT TERRITORY
4.1 Collaborative Development and Marketing. The Parties agree jointly to
conduct clinical development of, and to commercialize in the Joint Territory,
all Kirin Products and any Collaboration Products (as such term is defined in
the Research and License Agreement) that result from the Research Program. Such
collaborative clinical development and marketing shall be conducted pursuant to
a Commercialization Agreement to be negotiated and agreed to and
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signed by the Parties, which agreement shall be consistent with the applicable
provisions of the Kirin/Dendreon Term Sheet and with the summary terms set forth
below, and will contain, in addition, such other reasonable and typical terms as
are consistent with similar agreements in the industry and the following terms:
Under the terms of such agreement, Dendreon and Kirin shall share equally in all
the costs of conducting clinical development of such Kirin Products and
Collaboration Products in the Joint Territory and shall share equally the
marketing profits from sales of such Kirin Products and Collaboration Products
in the Joint Territory, with "marketing profit" understood to mean the total
revenue derived from such sales less the actual costs directly attributable to
the manufacture, marketing and sale of such products. The details of such joint
clinical development and marketing arrangement shall be set forth in a
Commercialization Agreement consistent with the foregoing.
ARTICLE 5
FEES AND ROYALTIES
5.1 Technology Transfer Fee. Kirin shall pay Dendreon a non-refundable
technology transfer fee in the amount of eight million U.S. dollars
($8,000,000), payable in accordance with the following schedule:
(a) Five million dollars ($5,000,000) in cash on the Effective
Date.
(b) Three million dollars ($3,000,000) in cash within [ * ] of the
[ * ] of the [ * ] for the [ * ]. For purposes of this Section, [ * ] means
[ * ] on which [ * ] in [ * ] to [ * ] the [ * ].
The foregoing technology transfer fee payments are inclusive of such
withholding taxes as are finally ascertained to be due and payable by Kirin on
account of Dendreon and shall be made by wire transfer to an account designated
by Dendreon for such purpose.
5.2 Royalties on Sales of Kirin Products.
(a) Subject to subsection (b) below, Kirin shall pay Dendreon
royalties on sales of Kirin Products by or on behalf of Kirin or its Affiliates
or Sublicensees in any country excluding the Joint Territory, as follows:
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(i) Kirin shall pay royalties equal to [ * ] of the Net
Revenue based on sales of Kirin Products in such countries by Kirin and its
Affiliates and Sublicensees (except as otherwise provided in subclause (ii)
below);
(ii) for so long as China or another country in the Kirin
Territory imposes an upper limit on royalties transferable outside of China or
such other country, Kirin shall pay royalties on the Net Revenue based on sales
of the Kirin Products sold in such countries equal to the greater of: (A) [ * ]
of any such upper limit; or (B) [ * ] of such Net Revenue; provided that the
royalty payable under this Section 5.2(a)(ii) shall not exceed [ * ] of such Net
Revenue for any particular royalty accounting period.
(b) For each particular Kirin Product, Kirin shall pay the royalties
specified above, on a country by country basis, until the later of the
expiration of ten (10) years from the first commercial launch of such Kirin
Product in such country or the last to expire of the Patents with claims
covering such Kirin Product or its manufacture or use in such country. The
foregoing royalty payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon, and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.3 Royalties on Sales of Licensed Dendreon Products.
(a) Subject to subsection (b) below, Kirin shall pay Dendreon
royalties on sales of Licensed Dendreon Products in the Kirin Territory as
follows:
(i) Kirin shall pay a royalty equal to [ * ] of the Net
Revenue based on sales of Licensed Dendreon Products sold in the Kirin Territory
by Kirin or its Affiliates or Sublicensees (except as otherwise provided in
subclause (ii) below);
(ii) for so long as China or any other country in the Kirin
Territory imposes an upper limit on royalties transferable outside of China or
such other country, Kirin shall pay Dendreon a royalty based on the Net Revenue
for Licensed Dendreon Products sold in such countries equal to the greater of:
(A) [ * ] of any such upper limit; or (B) [ * ] of such Net
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Revenue; provided that the royalty payable under this Section 5.3(a)(ii) shall
not exceed [ * ] of such Net Revenue for any particular royalty accounting
period.
(b) Kirin shall pay the royalties specified above, on a country by
country basis until the later of the expiration of ten (10) years from the first
commercial launch of the first Dendreon Product in such country or the last to
expire of the Patents with claims covering any Dendreon Product in such country.
The foregoing royalty payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon, and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.4 Royalties on Dendreon Sales of Licensed Kirin Products . Dendreon shall
pay Kirin a royalty equal to [ * ] of the Net Revenue based on sales of Licensed
Kirin Products sold by Dendreon, its Affiliates or any of its Sublicensees in
North America. With respect to each such Licensed Kirin Product, Dendreon shall
pay the royalties specified above on a country by country and product by product
basis until the later of the expiration of ten (10) years from the first
commercial launch of such Licensed Kirin Product in such country or the last to
expire of the Patents with claims covering such Licensed Kirin Product in such
country. The foregoing royalty payments are inclusive of such withholding taxes
as are finally ascertained to be due and payable by Dendreon on account of
Kirin, and shall be made by wire transfer to an account designated by Kirin for
such purpose.
5.5 Kirin Milestone Payments. Kirin shall make to Dendreon the following
non-refundable milestone payments on a product by product basis for each
Licensed Dendreon Product for which Kirin has exercised the Kirin Option:
Within [ * ] of the [ * ] of the [ * ] $1,000,000
Within [ * ] of the [ * ] of [ * ] $2,000,000
Within [ * ] of [ * ] $2,000,000
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The foregoing milestone payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.6 Dendreon Milestone Payments. Dendreon shall make to Kirin the
following non-refundable milestone payments on a product by product basis for
each Licensed Kirin Product for which Dendreon has exercised the Dendreon
Option:
Within [ * ] of the [ * ] of the [ * ] $1,000,000
Within [ * ] of the [ * ] of [ * ] the [ * ] $2,000,000
Within [ * ] of [ * ] the [ * ] $2,000,000
The foregoing payments are inclusive of such withholding taxes as are finally
ascertained to be due and payable by Dendreon on account of Kirin and shall be
made by wire transfer to an account designated by Kirin for such purpose.
5.7 Payment of Royalties. Royalty obligations hereunder shall accrue at
the time of sale of the applicable Product, and all such royalties that have
accrued during a particular calendar quarter shall be paid quarterly within
sixty (60) days after the end of such calendar quarter. Such royalties shall be
calculated on the basis of Net Revenue in the local currency of each country,
and converted into U.S. Dollars and paid in U.S. Dollars on the basis of the
average currency exchange rate for the applicable calendar quarter quoted by the
Tokyo Mitsubishi Bank (or its successor) for currency exchanges in excess of one
million U.S. dollars ($1,000,000). Each royalty payment shall be accompanied by
a statement of such royalties showing the Net Revenue for the applicable
royalty-bearing Products, on a country by country and product by product basis.
If a Party receives a refund or rebate for taxes it paid on behalf of the other
Party, the Party receiving such refund or rebate shall promptly remit it to the
other Party.
5.8 Royalty Structure and Marketing Strategy. The terms of this Agreement
permit Kirin to market and sell Kirin Products and Licensed Dendreon Products to
hospitals and other similar health-care provider organizations as services or as
products comprising Dendritic
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Cells activated or loaded with specific antigen, engineered antigen or antigen
gene, including without limitation a Kirin Antigen. Kirin shall not, and
covenants not to, sell Separation Devices, Reagents or Dendreon Antigens to
Third Parties except as permitted in this Agreement. The Parties agree to
discuss alternative marketing strategies for Kirin Products and Licensed
Dendreon Products when commercially reasonable to do so. At such time, the
Parties also shall agree on any needed adjustment to the royalty calculation
mechanism established for sales of such Kirin Products and Dendreon Products,
including appropriate amendments to the definitions of such terms under Article
1. For example, if the Parties agree that Kirin may sell devices and reagents
(including specific antigens) for use by a Third Party in isolating and
activating Dendritic Cells, then such definitions may be amended to include the
concept that a Dendreon Product or Kirin Product includes any set of products
that are developed by the applicable Party and are intended for use in preparing
a product meeting the criteria in subsection 1.7(a) or 1.22(a), as applicable,
or in performing a service as set forth in subsection 1.7(b) or 1.22(b), as
applicable. Any change to the current marketing strategy, and any adjustment to
the royalty calculation mechanism related thereto, must be set forth in writing
and signed by an authorized representative of each Party. Neither Party shall
have any obligation to make changes to the marketing strategy already
established in this Agreement.
ARTICLE 6
EQUITY INVESTMENT BY KIRIN
6.1 Stock Purchase at IPO. In further consideration for the license
granted by Dendreon to Kirin under the Agreement, in addition to Kirin's
purchase of two million dollars ($2,000,000) worth of Series D preferred shares
of Dendreon on July 31, 1998, Kirin agrees to purchase from Dendreon, in a
private placement, five million dollars ($5,000,000) worth of unregistered
Dendreon common stock at the time of Dendreon's initial public offering (IPO),
with the price per share for such purchase equal to the price of the sale of
Dendreon's stock to the public in such IPO, provided that an initial public
offering of Dendreon shares of common stock is completed by January 1, 2000.
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6.2 Put Right. In the event that Dendreon has not completed an IPO by
January 1, 2000, then Dendreon will thereafter have the right, at its sole
option but only until January 1, 2001, to require Kirin to purchase up to one
million (1,000,000) shares of Dendreon preferred stock at a per share purchase
price to be negotiated by the Parties in good faith reflecting the fair value of
such stock, but in any event not less than the per share purchase price of the
most recent private sale of Dendreon preferred stock in excess of an aggregate
of one million dollars ($1,000,000) of preferred stock, and provided that the
total amount of the purchase price for such stock shall not exceed five million
dollars ($5,000,000). Dendreon shall exercise such right in writing to Kirin
prior to January 1, 2001, and upon such exercise the Parties shall negotiate the
purchase price in good faith and close the purchase of the capital stock as soon
as reasonably practicable, but in no event longer than sixty (60) days from the
date that Dendreon exercised such option. Dendreon may not exercise such right
after January 1, 2001, unless otherwise agreed to by the Parties in writing.
6.3 No Double Purchase. For clarity, it is agreed that, under the terms
of this Article 6, Kirin is required to purchase Dendreon stock only under
Section 6.1 in a private placement in conjunction with the IPO, or under Section
6.2 after exercise of the Dendreon's put right therein, but shall not be
required to purchase Dendreon stock under both such Sections.
ARTICLE 7
CONFIDENTIALITY
7.1 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 ten (10) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose to a Third Party or use for any purpose other than as provided for in
this Agreement any Information and materials furnished to it by the other Party
pursuant to this Agreement (collectively, "Confidential Information"), except to
the extent that it can be established by the receiving Party by competent proof
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;
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(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.
7.2 Authorized Disclosure. Each Party may disclose the other's
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or 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 best efforts to
secure confidential treatment of such Confidential Information required to be
disclosed.
7.3 Survival. This Article 7 shall survive the termination or expiration
of this Agreement for a period of ten (10) years.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 Ownership. Each Party shall solely own Patents for any inventions
made solely by that Party's employees or consultants in the course of performing
any work under this Agreement. The law of inventorship of the United States
shall apply to any inventions whether made inside or outside the United States
by either of the Parties.
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8.2 Prosecution and Maintenance of Patents by Dendreon; Abandonment.
Dendreon shall have the responsibility to file, prosecute and maintain the
Dendreon Patents in the world and shall bear all expenses associated therewith.
All decisions regarding prosecution of the Dendreon Patents in the world will be
at Dendreon's sole discretion and responsibility. Dendreon agrees to keep Kirin
informed of the course of patent prosecution or other proceedings relating to
the Dendreon Patents in the Kirin Territory in the Field. In the event Dendreon
elects not to prosecute a Dendreon Patent application filed or to abandon an
issued Dendreon Patent in the Kirin Territory in the Field, Dendreon shall
notify Kirin not less than two (2) months before any relevant deadline, and
thereafter Kirin shall have the right to pursue, at its expense and sole
discretion, prosecution of such Dendreon Patent application or maintenance of
such issued Patent. In such event, Dendreon shall promptly assign its rights
therein to Kirin.
8.3 Prosecution and Maintenance of Patents by Kirin; Abandonment. Kirin
shall have the responsibility to file, prosecute and maintain the Kirin Patents
in the world and shall bear all expenses associated therewith. All decisions
regarding prosecution of the Kirin Patents in the world will be at Kirin's sole
discretion and responsibility. Kirin agrees to keep Dendreon informed of the
course of patent prosecution or other proceedings relating to the Kirin Patents
in North America in the Field. In the event Kirin elects not to prosecute a
Kirin Patent application filed, or to abandon an issued Kirin Patent in North
America in the Field, Kirin shall notify Dendreon not less than two (2) months
before any relevant deadline, and thereafter Dendreon shall have the right to
pursue, at its expense and in its sole discretion, prosecution of such Kirin
Patent application or maintenance of such issued Patent. In such event, Kirin
shall promptly assign its rights therein to Dendreon.
8.4 Defense and Settlement of Third Party Claims. If a Third Party files
a claim, suit or action against a Party claiming that a Patent or other
intellectual property right owned by such Third Party is infringed by the
development, use, marketing, distribution or sale of a Kirin Product or Dendreon
Product, and such claim, suit or action (a "Claim") arises out of such Party's
practice in the Field pursuant to this Agreement, the Party against whom the
Third Party has filed such Claim ("Defending Party") will have the right to
defend against any such Claim. The other Party will assist in the defense of any
such Claim as reasonably requested by the
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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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Defending Party and at the Defending Party's expense and may retain separate
counsel at its own expense. The Defending Party shall not settle any such Claim
without the prior express written consent of the other Party, which consent
shall not be unreasonably withheld or delayed, if such settlement would impose
on such other Party the obligation to pay any damages or would adversely affect
such Party's rights.
8.5 Third Party Royalties. In the event that a Party is required to
obtain a license under a Third Party patent that covers or claims the
manufacture, use or sale of a Kirin Product or Dendreon Product in order to
practice a Dendreon Patent or Kirin Patent to sell a Kirin Product or Dendreon
Product as permitted under the licenses in Article 2, provided, that such Party
shall disclose the relevant portions of such license under such Third Party
patent to the other Party in English and, if any, the extent of any alleged
infringement, such Party shall be entitled to deduct [ * ] of any royalties
owing to such Third Party based on the sale of such Kirin Products or Dendreon
Products under such license from amounts owing to the other Party, subject to a
maximum royalty reduction of [ * ] of the amounts that otherwise would be owed
by such Party under Article 5 hereof.
8.6 Enforcement of Patent Rights
(a) If any Dendreon Patent or Kirin Patent in the Field is infringed
by a Third Party, 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 such infringement in reasonable detail.
(b) Dendreon shall have the right, but not the obligation to
institute, prosecute and control any action or proceeding with respect to
infringement of Dendreon Patents in the Dendreon Territory, Kirin Patents in
North America and patents abandoned by Kirin pursuant to Section 8.3.
(c) Kirin shall have the right, but not the obligation, to institute,
prosecute and control any action or proceeding with respect to infringement of
Dendreon Patents in the Kirin
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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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Territory, Kirin Patents in the Kirin Territory and the rest of the world except
North America and the Joint Territory, and patents abandoned by Dendreon
pursuant to Section 8.2.
(d) If a Party given the right to enforce a Kirin Patent or Dendreon
Patent pursuant to Section 8.6(b) or Section 8.6(c) fails to bring an action or
proceeding against a suspected infringer within a period of ninety (90) days
after having knowledge of such infringement in the Field, the other Party shall
have the right to bring and control an action against such infringer by counsel
of its own choice, and the non-enforcing Party shall have the right to be
represented in any such action by counsel of its own choice at its own expense.
(e) The Party controlling an action involving any infringement in the
Field shall consider in good faith the interests of the other Party in so doing,
and shall not settle or consent to an adverse judgment in any such action which
would have a material adverse effect on the rights or interests of the other
Party without the prior express written consent of such other Party. If one
Party brings any such action or proceeding, the other Party agrees to be joined
as a Party plaintiff if necessary to prosecute the action and to give the first
Party reasonable assistance and authority to file and prosecute the suit. In
each case relating to infringement within the Field, each Party shall bear the
costs of its enforcement of the Patent rights discussed in this section and
retain for its own account any amounts received from Third Parties; provided,
however, that any such recovery shall be deemed Net Revenue of the infringed
Product, subject to the royalty provisions of Article 5.
(f) The Parties shall consult regarding the institution, prosecution
and control of any action or proceeding with respect to infringement outside the
Field of any of the Dendreon Patents or Kirin Patents. In the absence of
Agreement with respect to infringement outside the Field, the Party owning the
infringed Kirin Patent or Dendreon Patent may proceed in such manner as the law
permits.
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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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ARTICLE 9
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties. Each of the Parties hereby
represents and warrants as follows:
(a) This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms. The execution, delivery and
performance of the 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 is bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
(b) Such Party has not, and during the term of the Agreement will
not, grant any right to any Third Party relating to its respective technology in
the Field licensed to the other Party hereunder which would conflict with such
rights granted to the other Party.
ARTICLE 10
REPORTS, RECORDS AND SAMPLES
10.1 Sharing of Information. Commencing on the Effective Date and
continuing during the term of this Agreement, each Party will make available and
disclose to the other Party the Information Controlled by such Party that
reasonably relates to such other Party's activities under this Agreement in the
Field. In particular, Dendreon will disclose to Kirin on a regular basis the
Dendreon Technology and provide reasonable assistance to Kirin (at Kirin's
request and expense) in transferring such Dendreon Technology for use in
developing Kirin Products and for use in commercializing the Licensed Dendreon
Products in the Kirin Territory. Similarly, Kirin will disclose to Dendreon on a
regular basis the Kirin Technology and provide reasonable assistance to Dendreon
(at Dendreon's request and expense) in transferring such Kirin Technology for
use in developing Dendreon Products and for use in commercializing the Licensed
Kirin Products in North America. In addition, both Parties will disclose to each
other any non-clinical and clinical regulatory information which relates to such
other Party's activities under this Agreement in the Field.
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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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10.2 Records of Net Revenue. Each Party will maintain complete and
accurate records of Net Revenue which are relevant to payments to be made under
this Agreement. Such records shall be open during reasonable business hours, for
a period of three (3) years from creation of individual records, for examination
at the other Party's expense, and not more often than once each year and upon
not less than thirty (30) days advance notice, by a certified public accountant
selected by the other Party and acceptable to the Party keeping the records for
the sole purpose of verifying for the inspecting Party the correctness of
calculations or payments made under this Agreement.
10.3 Materials. The Parties intend to maintain an open and extensive
exchange of biological, chemical and other tangible materials during the course
of the Agreement. Information obtained by the other Party in the testing of
such materials will be promptly disclosed to the Party providing the sample, and
all such Information will be considered Information to be protected by both
Parties under the restrictions of Article 7.
10.4 Publicity Review. If either Party is required by law or regulation
to make a public disclosure or announcement concerning this Agreement or the
subject matter thereof, such Party shall give reasonable prior advance notice of
the proposed text of such disclosure or announcement to the other Party for its
review and comment. The terms of this Agreement may also be disclosed to Third
Parties with the consent of the other Party, which consent shall not be
unreasonably withheld so long as such disclosure is made under a binder of
confidentiality.
10.5 Publications. Each Party agrees that it shall not publish or
present the results of studies carried out pursuant to this Agreement without
the opportunity for prior review by the other Party. Each Party shall provide to
the other the opportunity to review any proposed abstracts, manuscripts or
presentations (including information to be presented verbally) which relate to
the Field at least thirty (30) days prior to their intended submission for
publication and such submitting 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 is given a reasonable period of
time to secure patent protection for any material in such publication or
presentation which it believes is patentable.
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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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10.6 Adverse Event Reporting. In the event that either Party, its
Affiliates or Sublicensees obtains, directly or indirectly, information and data
on the side effects or toxicity of a Product during the development, marketing
and distribution of any of the Products hereunder, such Party shall disclose, as
soon as reasonably practicable, such information and data to the other Party.
Either Party, its Affiliates and Sublicensees shall notify the other Party as
soon as reasonably practicable of any complaints or reports of adverse events
associated with the Products which are serious, new or unexpected events, or
events with increased frequency. All other adverse events associated with
Products shall be reported by either Party to the other Party in summary format
at least quarterly. At the request of either Party, the other Party shall
cooperate in the investigation and respond to any Product complaints which may
relate to the role of the informed Party in the development or manufacture of
the Products. Each Party shall be responsible for all reporting of adverse
events to regulatory authorities in its respective territory.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement shall commence on the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
expiration of all of the payment obligations of Kirin and Dendreon under the
Agreement.
11.2 Termination for Breach. If either Party materially breaches this
Agreement at any time, which breach is not cured within thirty (30) days of
written notice thereof if such breach is caused by the failure of a Party to
meet its financial obligations under this Agreement, or within ninety (90) days
of written notice thereof for any other material breach of this Agreement, from
the non-breaching Party specifying in detail the nature of the breach, the
breaching Party's licenses granted in this Agreement shall terminate and the
non-breaching Party shall have the exclusive, royalty-free right under the
breaching Party's Technology, Patents and Licensed Marks to make, have made, use
and sell Products it already had developed or sold, in those countries in which
it already had developed or sold such Products. The breaching Party will assist
the non-breaching Party in every proper way to effect the license granted above.
The breaching Party shall further deliver to the non-breaching Party such
relevant tangible materials
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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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embodying such Technology, Patents and Licensed Marks as may be necessary or
useful to the exercise of the non-breaching Party of the license hereunder.
11.3 Surviving Rights. The obligations and rights of the Parties under
Articles 7, 8 and 12, and Sections 2.6(c)-(f), 10.4, 10.5, 13.6 and 13.7 of this
Agreement will survive termination.
11.4 Non-exclusive Licenses after Expiration. Upon the expiration of the
Agreement under Section 11.1, Kirin shall retain a non-exclusive, royalty-free
license to use the Dendreon Technology and Dendreon Licensed Marks to make, have
made, use offer for sale and sell in the Kirin Territory the Kirin Products and
Licensed Dendreon Products that Kirin was selling as of the date of such
expiration, and Dendreon shall retain a non-exclusive, royalty-free license to
use the Kirin Technology and Kirin Licensed Marks to make, have made, use, offer
for sale and sell in North America the Dendreon Products and Licensed Kirin
Products that Dendreon was selling as of the date of such expiration.
11.5 Termination Without Cause. On or after January 1, 2002, Kirin may
terminate this Agreement without cause upon ninety (90) days prior written
notice to Dendreon. At such time, all licenses granted to Kirin under this
Agreement shall terminate, and Kirin shall covenant not to use any Information
or materials of any kind related to, made or derived from the Dendreon
Technology or Dendreon Licensed Marks after such termination. Kirin also shall
return to Dendreon all Information and materials of any kind related to, made or
derived from the Dendreon Technology or Dendreon Licensed Marks upon such
termination. Kirin's licenses to Dendreon under this Agreement shall survive
any such termination. Dendreon's royalty obligations to Kirin shall survive any
such termination and shall terminate as provided in Article 5.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification in Kirin Territory. Kirin shall indemnify, defend
and hold Dendreon harmless from and against any and all liability, damage, loss,
cost (including
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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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reasonable attorneys' fees) and expense resulting from any infringement, claim
of bodily injury or property damage (a) relating to the development,
manufacture, use, distribution or sale of any Product by Kirin, its Affiliates,
Sublicensees, employees or agents or (b) due to the negligence or willful
misconduct of Kirin or its Affiliates, Sublicensees, employees or agents.
12.2 Indemnification in the Dendreon Territory. Dendreon shall indemnify
and hold Kirin harmless from and against any and all liability, damage, loss,
cost (including reasonable attorneys' fees) and expense resulting from any
infringement, claim of bodily injury or property damage (a) relating to the
development, manufacture, use, distribution or sale of any Product by Dendreon,
its Affiliates, Sublicensees, employees or agents or (b) due to the negligence
or willful misconduct of Dendreon or its Affiliates, Sublicensees, employees or
agents.
ARTICLE 13
MISCELLANEOUS
13.1 Assignment. Neither Party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning Party or (ii) to an Affiliate;
provided, however, that in no event shall either Party's rights and obligations
hereunder be assigned without prior written notice to the other Party. In any
case, neither Party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their permitted
successors and assigns.
13.2 Retained Rights. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development with
respect to, and market products outside of, the Field using such Party's
Technology, but no license to use the other Party's technology to do so is
granted herein expressly or by implication.
13.3 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
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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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the failure is occasioned by government action, war, fire, explosion, flood,
strike, lockout, 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;
provided, however, in no event shall a Party be required to settle any labor
dispute or disturbance.
13.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
13.5 No Trademark Rights. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Dendreon" or "Kirin" or any other trade name or trademark of the other Party in
connection with the performance of the Agreement.
13.6 Notices. All notices and other communications 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 Dendreon, addressed to:
Dendreon Corporation
291 North Bernardo Avenue
Mountain View, CA 94043
Attention: C. S. Henney
Telephone: (650) 964-6744
Telecopy: (650) 964-0337
With copy to:
Cooley Godward LLP
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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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Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barclay J. Kamb, Esq.
Telephone: (650) 843-5052
Telecopy: (650) 857-0663
If to Kirin, addressed to:
Kirin Brewery Co., Ltd.
26-1, Jingumae 6-chome
Shibuya-ku
Tokyo 150-8011, Japan
Attention: Akihiro Shimosaka
Research and Product Development Department
Pharmaceutical Division
Telephone: (03) 5485-6805
Telecopy: (03) 3499-6152
13.7 Dispute Resolution. If any dispute, controversy or claim arises out
of or in connection with this Agreement, the Parties shall use reasonable
efforts to settle it by friendly negotiation within sixty (60) days of notice
from one Party to the other of such dispute, controversy or claim, before
pursuing any other remedies available to them. If either Party fails or refuses
to participate in such negotiations, or if, in any event, the dispute,
controversy or claim is not resolved to the satisfaction of both Parties within
the sixty (60) day period, any such dispute, controversy or claim shall be
settled by arbitration. Any such arbitration shall be conducted in accordance
with the Japan-American Trade Arbitration Agreement of September 16, 1952. The
Parties agree that any such arbitration shall be conducted in the English
language in a location within the United States selected by the Party that did
not initiate such arbitration, and the Agreement shall be governed by and
construed in accordance with the laws of the State of California and the United
States of America. The arbitrators shall include one independent, un-affiliated
nominee selected by each Party and a third neutral arbitrator selected by such
nominees. The Parties agree that any arbitration panel shall include members
knowledgeable as to the evaluation of biopharmaceutical technology. Judgment
upon the award rendered may be entered in the highest state or federal court or
forum, state or federal, having jurisdiction; provided, however, that the
provisions of this Section 13.7 shall not apply to any dispute 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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controversy as to which any treaty or law prohibits such arbitration. The
prevailing Party shall be entitled to reasonable attorney's fees and costs to be
fixed by the arbitrators.
13.8 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.
13.9 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 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.
13.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
13.11 Entire Agreement. This Agreement sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties hereto with regard to the subject matter discussed herein
and supersedes and terminates all prior agreements and understanding between the
Parties with regard to the subject matter discussed herein. There are no
covenants, promises, agreements, warranties, representations conditions or
understandings, either oral or written, between the Parties with regard to the
subject matter discussed herein other than as set forth in this Agreement;
provided that the Parties agree that the Kirin/Dendreon Term Sheet provides
terms for a collaboration program, to be set forth in a Research and License
Agreement to be negotiated and executed by the Parties consistent with such
terms, for joint development and commercialization in the Joint Territory, to be
set forth in a Commercialization Agreement to be negotiated and executed by the
Parties consistent with such terms, and for the manufacture and supply of
products, to be set forth in a Manufacturing and Supply Agreement to be
negotiated and executed by the Parties consistent with such terms.
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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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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.
13.12 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 the Section or Paragraphs to which they apply.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
DENDREON CORPORATION KIRIN BREWERY CO., LTD.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/ Christopher S. Henney By: /s/ Koichiro Aramaki
------------------------------------- -------------------------------------
Title: Chief Executive Officer 12/7/98 Title: President, Pharm. Div. 12/10/98
------------------------------------ --------------------------------------
</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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EXHIBIT A
DENDREON KNOW-HOW
Dendreon "Know-How" would also relate to information (clinical protocols, Batch
Record, SOP's, Release Specifications, minutes from meetings, and other Dendreon
documents) that was discussed and memorialized at previous Kirin-Dendreon
Meetings. Dendreon "Know-How" would include information such as the following:
[*]
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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.
1.
<PAGE>
EXHIBIT B
DENDREON PATENTS
[ * ]
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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.
1.
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EXHIBIT C
KIRIN PATENTS
None as of the Effective Date.
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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.
1.
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EXHIBIT D
TRADEMARK RIGHTS
1. Kirin Licensed Marks
The following trademarks are the subject of the foregoing license:
Word Marks:
Stylized Marks:
2. Kirin Trademark Applications
Mark Application No. Application Date
- ---- --------------- ----------------
3. Dendreon Licensed Marks
The following trademarks are the subject of the foregoing license:
Word Marks:
Stylized Marks:
4. Dendreon Trademark Registrations and Applications
Mark Registration No. Registration Date
- ---- ---------------- -----------------
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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.
1.
<PAGE>
5. Forms of Authorized Use of Kirin Trademarks
6. Forms of Authorized Use of Dendreon Trademarks
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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.
2.
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EXHIBIT 10.19
DENDREON CORPORATION
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered into as
of May ___, 2000, by and among Dendreon Corporation, a Delaware corporation (the
"Company"), and Kirin Brewery Company, Ltd. (the "Purchaser").
RECITALS
Whereas, the Company has authorized the sale and issuance to the Purchaser
of an aggregate of up to five million dollars ($5,000,000) of its Common Stock,
$.001 par value per share (the "Shares"), at a purchase price per share equal to
the price at which the Company's Common Stock is first sold in the Company's
initial underwritten public offering (the "IPO");
Whereas, the Purchaser desires to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to the Purchaser
on the terms and conditions set forth herein.
AGREEMENT
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized the sale and issuance to
the Purchaser of the Shares.
1.2 Sale and Purchase. Subject to the terms and conditions hereof,
at the Closing (as hereinafter defined) the Company hereby agrees to issue and
sell to the Purchaser and the Purchaser agrees to purchase from the Company the
Shares at an aggregate purchase price of [five million dollars ($5,000,000)].
2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of the Shares
under this Agreement (the "Closing") shall take place at [8:00] a.m. on the date
of the closing of the IPO, at the offices of Cooley Godward llp, 5200 Carillon
Point, Kirkland, WA, 98033-7356 or at such
<PAGE>
other time or place as the Company and the Purchaser may mutually agree (such
date is hereinafter referred to as the "Closing Date").
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchaser a certificate representing the
Shares against payment of the purchase price therefor by check or wire transfer
made payable to the order of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as of the
date of this Agreement as set forth below.
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares, and to carry out the provisions of
this Agreement and to carry on its business as presently conducted and as
presently proposed to be conducted.
3.2 Capitalization; Voting Rights. The authorized capital stock of
the Company is as set forth in the Company's Registration Statement on Form S-1,
No. 333-31920, as filed with the Securities and Exchange Commission on March 8,
2000, as amended through the date of this Agreement (the "Registration
Statement"), as of the date set forth therein. When issued in compliance with
the provisions of this Agreement and the Company's Amended and Restated
Certificate of Incorporation (the "Certificate"), the Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances created by the Company; provided, however, that the Shares may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein or as otherwise required by such laws at the time a transfer
is proposed.
3.3 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, issuance and
delivery of the Shares pursuant hereto has been taken or will be taken prior to
the Closing. This Agreement, when executed and delivered, will be a valid and
binding obligation of the Company enforceable in accordance with its terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights and (b) general principles of equity that restrict the
availability of equitable remedies. The sale of the Shares is not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.4 Financial Statements. The Company has made available to the
Purchaser (a) its audited balance sheet as at December 31, 1999 and audited
statement of income and cash flows for the twelve months ending December 31,
1999, and (b) its unaudited balance sheet as at March 31, 2000 (the "Statement
Date") and unaudited consolidated statement of income and cash flows for the
three month period ending on the Statement Date (collectively, the "Financial
<PAGE>
Statements"). The Financial Statements, together with the notes thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and position of
the Company as of December 31, 1999 and the Statement Date; provided, however,
that the unaudited financial statements are subject to normal recurring year-end
audit adjustments, and do not contain all footnotes required under generally
accepted accounting principles.
3.5 Compliance with Other Instruments. The Company is not in
violation or default of any term of its Certificate or Bylaws, or of any
provision of any material mortgage, indenture, contract, agreement, instrument
or contract to which it is party or by which it is bound or of any judgment,
decree, order, writ. The execution, delivery, and performance of and compliance
with this Agreement and the issuance and sale of the Shares pursuant hereto,
will not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.
3.6 Full Disclosure. The Company has provided the Purchaser with a
copy of the Registration Statement and all information requested by the
Purchaser in connection with its decision to purchase the Shares, including all
information the Company believes is reasonably necessary to make such investment
decision. To the Company's knowledge, neither this Agreement, the exhibits
hereto, nor any other document delivered by the Company to the Purchaser or its
attorneys or agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, contain any untrue statement of a material fact
nor, to the Company's knowledge, omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 Requisite Power and Authority. Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and to carry out its provisions. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement have been or will be effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (b) as
limited by general principles of equity that restrict the availability of
equitable remedies.
<PAGE>
4.2 Investment Representations. Purchaser understands that the
Shares are not registered under the Securities Act of 1933, as amended (the
"Securities Act"), on the ground that the sale provided for in this Agreement
and the issuance of securities hereunder is exempt from registration under the
Securities Act pursuant to Regulation S thereunder, and that the Company's
reliance on such exemption is predicated on the Purchaser's representations set
forth herein. Purchaser hereby represents and warrants as follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares are registered pursuant to the
Securities Act, or an exemption from registration is available. Purchaser also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) Acquisition for Own Account. This Agreement is made with
Purchaser in reliance upon Purchaser's representation to the Company, which by
Purchaser's execution of this Agreement Purchaser hereby confirms, that the
Shares will be acquired for investment for Purchaser's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof in the United States or to a United States resident, and that Purchaser
has no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, Purchaser further represents
that the Purchaser does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person in the United States or to a United States
resident, with respect to any of the Shares.
(c) Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement.
(d) Qualified Regulation S Purchaser. The term "Qualified
Regulation S Purchaser" as used herein refers to a person or entity who is not a
United States person, as such term is defined in Rule 902 promulgated under the
Securities Act. The Purchaser represents to the Company that it is a Qualified
Regulation S Purchaser.
(e) Company Information. Purchaser has received and read the
Registration Statement and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from the Company and its management regarding
the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an
<PAGE>
exemption from such registration is available. Purchaser has been advised or is
aware of the provisions of Rule 144 promulgated under the Securities Act as in
effect from time to time, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things: the availability of certain current public information about
the Company, the resale occurring following the required holding period under
Rule 144 and the number of shares being sold during any three-month period not
exceeding specified limitations.
(g) Residence. The office or offices of the Purchaser in which
its investment decision was made is located at the address or addresses of the
Purchaser set forth on the signature page hereof.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchaser's Obligations at the Closing.
Purchaser's obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) Legal Investment. On the Closing Date, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which Purchaser and the Company are subject.
(c) Corporate Documents. The Company shall have delivered to
Purchaser or its counsel, copies of all corporate documents of the Company as
Purchaser shall reasonably request.
5.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
(a) Representations and Warranties True. The representations
and warranties in Section 4 made by the Purchaser shall be true and correct as
of the Closing Date, with the same force and effect as if they had been made on
and as of said date.
(b) Performance of Obligations. Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by Purchaser on or before the Closing.
(c) Consents, Permits, and Waivers. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of
<PAGE>
the transactions contemplated by the Agreement, except for such as may be
properly obtained subsequent to the Closing.
6. MISCELLANEOUS.
6.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware as such laws are applied to
agreements between Delaware residents entered into and performed entirely in
Delaware.
6.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby for a period of one (1) year
following the Closing Date. All statements as to factual matters contained in
any certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
6.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.
6.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and Purchaser.
(b) The obligations of the Company and the rights of Purchaser
under this Agreement may be waived only with the written consent of Purchaser.
6.7 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) two (2) days after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page
<PAGE>
hereof and to Purchaser at the address set forth on signature page hereof or at
such other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other party hereto.
6.8 Expenses. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement.
6.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.10 Titles and Subtitles. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.12 Confidentiality. Each party hereto agrees that, except with
the prior written consent of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other party to which such party has been or
shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of the Shares purchased hereunder. The provisions of this Section 6.12
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto.
In Witness Whereof, the parties hereto have executed this Stock Purchase
Agreement as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
DENDREON CORPORATION KIRIN BREWERY COMPANY, LTD.
Signature: Signature:
------------------------- -------------------------
Print Name: Print Name:
------------------------ ------------------------
Title: Title:
----------------------------- -----------------------------
Address: 3005 First Avenue Address: 26-1 Jingumae 6-chome
Seattle, WA 98121 Shibuya-ku
Tokyo 150-8011, Japan
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Selected
Financial Data" and "Experts" and to the use of our report dated February 18,
2000 (except for Note 13, as to which the date is June , 2000), in the
Registration Statement (Form S-1 No. 333-31920) and related Prospectus of
Dendreon Corporation for the registration of 5,175,000 shares of its common
stock.
Ernst & Young LLP
Seattle, Washington
June , 2000
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion
of the stock split and the increase in authorized shares described in paragraph
2 of Note 13 to the financial statements.
Ernst & Young LLP
Seattle, Washington
May 20, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,495
<SECURITIES> 5,770
<RECEIVABLES> 838
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,375
<PP&E> 3,954
<DEPRECIATION> 2,398
<TOTAL-ASSETS> 18,965
<CURRENT-LIABILITIES> 6,155
<BONDS> 0
0
13
<COMMON> 1
<OTHER-SE> 7,509
<TOTAL-LIABILITY-AND-EQUITY> 18,965
<SALES> 0
<TOTAL-REVENUES> 1,131
<CGS> 0
<TOTAL-COSTS> 4,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> (3,712)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,712)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,712)
<EPS-BASIC> (6.13)
<EPS-DILUTED> (6.13)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM S-1 REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 7,085 6,883 762
<SECURITIES> 6,728 3,047 7,461
<RECEIVABLES> 833 344 532
<ALLOWANCES> 0 25 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 15,202 10,408 8,963
<PP&E> 3,751 3,198 2,563
<DEPRECIATION> 2,252 2,064 1,718
<TOTAL-ASSETS> 17,375 12,038 9,910
<CURRENT-LIABILITIES> 5,264 3,743 1,492
<BONDS> 0 0 0
0 0 0
12 9 8
<COMMON> 1 1 1
<OTHER-SE> 6,339 3,752 8,297
<TOTAL-LIABILITY-AND-EQUITY> 17,375 12,038 9,910
<SALES> 0 0 0
<TOTAL-REVENUES> 3,519 1,849 793
<CGS> 0 0 0
<TOTAL-COSTS> 16,332 10,957 8,184
<OTHER-EXPENSES> 0 2 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 351 41 47
<INCOME-PRETAX> (12,718) (8,790) (7,163)
<INCOME-TAX> 0 600 0
<INCOME-CONTINUING> (12,718) (9,390) (7,163)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (12,718) (9,390) (7,163)
<EPS-BASIC> (13.75) (14.92) (21.37)
<EPS-DILUTED> (13.75) (14.92) (21.37)
</TABLE>
