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SECURITIES AND EXCHANGE COMMISSION Conformed
WASHINGTON, D.C. 20549 Copy
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 0-14879
CYTOGEN CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 22-2322400
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 College Road East, CN5308, Princeton, New Jersey 08540-5308
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (609) 987-8200.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Warrants to Purchase One Share of Common Stock, $.01 par value, of Registrant
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(Title of class)
Contingent Value Rights to Receive a Fraction of a Share of Common Stock,
$.01 par value, of Registrant
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's 29,026,936 shares of
Common Stock held by non-affiliates of the registrant on March 1, 1995, based on
$3.875 per share, the last reported sale price on the NASDAQ National Market
System on that date, was $112,479,377.
The number of shares of Common Stock outstanding as of March 1, 1995 was
31,443,865 shares.
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DOCUMENTS INCORPORATED BY REFERENCE
Document Form 10-K Part
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Portions of the definitive Proxy III
Statement with respect to the 1995
Annual Meeting of Stockholders
(hereinafter referred to as the
"Proxy Statement"), but specifically
excluding the sections titled
"Compensation Committee Report on
Executive Compensation" and
"Performance Graph", which shall not
be deemed to be incorporated by
reference herein.
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PART I
Item 1. Business
General
Cytogen Corporation ("Cytogen" or the "Company") is a biopharmaceutical
company engaged in the discovery, development and marketing of products to
better diagnose and treat disease. Cytogen's current portfolio of products
provides targeted delivery of diagnostic and therapeutic substances
directly to the sites of disease. Cytogen is using its patented and
proprietary technologies to develop specific in vivo cancer diagnostic
imaging and therapeutic products to build a focused cancer care franchise.
Cytogen may expand from cancer into other therapeutic areas employing
related technologies.
Currently, Cytogen's highest priority products are: (i) OncoScint/(R)/
CR/OV, the Company's monoclonal antibody-based diagnostic imaging agent for
colorectal and ovarian cancer (see "OncoScint CR/OV"), which has been
approved by the U.S. Food and Drug Administration ("FDA") since December
1992 and, in its colorectal cancer application, in various European
countries since June 1991; (ii) Samarium 153 EDTMP ("Samarium EDTMP"), a
cancer therapy agent for the treatment of bone pain associated with bone
metastases, which is in late Phase III clinical development with a New Drug
Application ("NDA") submission to FDA anticipated in the first half of
1995; and (iii) ProstaScint, a prostate cancer diagnostic imaging product,
for which a Product License Application ("PLA") was submitted to FDA in
January 1995. Cytogen has licensed to The DuPont Merck Pharmaceutical
Company ("DuPont Merck") the manufacturing and co-marketing rights to
Samarium EDTMP in the U.S. See "Marketing and Sales -- Samarium EDTMP --
DuPont Merck".
The Company is continuing to evaluate, invest in and support the sales
and marketing activities with respect to OncoScint CR/OV. While the
product has technically performed as predicted in clinical applications,
OncoScint CR/OV has achieved very limited sales, and negligible sales
growth, in both the U.S. and European markets since its introduction. The
Company has also assigned high priority to the product development and
commercialization programs for Samarium EDTMP and ProstaScint.
The Company's strategic plan also supports continued commitment to its
antibody "linker" technology through ongoing product development efforts
for cancer therapeutic agents. Cytogen expects to expand its current
product portfolio through in-licensing products and technologies. In
addition, Cytogen has committed additional resources to its molecular
recognition unit program which, as a result of recent patent filings and
development trends, has been renamed the Totally Synthetic Affinity
Reagents\SynGenes ("TSARs\SynGenes") program. This program involves long
peptides that have the ability to recognize and bind to specific target
sites in the human body. Cytogen believes that the ability of these
compounds to bind to predetermined sites may mediate certain diagnostic or
therapeutic effects more effectively than its current monoclonal antibody
delivery systems and other existing products. See "Research and
Development -- TSARs\SynGenes".
Cancer Diagnostic Imaging Products
Overview. The cancer diagnostic imaging products consist of Cytogen's
monoclonal antibody-based imaging agents for colorectal, ovarian, prostate,
bladder, breast and non-small cell lung cancers.
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As a result of the Company's decision to focus on its more advanced
products, studies for the bladder, breast and non-small cell lung cancer
imaging agents were suspended in 1993. The Company's imaging products for
colorectal, ovarian, and prostate cancer utilize Cytogen's proprietary
targeted delivery system, employing whole antibodies, to deliver the
diagnostic radioisotope indium-111 to malignant tumor sites.
During an imaging procedure, the radiolabeled monoclonal antibody
product is injected into the patient. The antibody travels through the
body seeking out and binding to tumor sites. The radioactivity from the
isotope that has been attached to the antibody can be detected from outside
the body by a gamma camera. The resultant image identifies the existence,
location and extent of disease in the body. Based on clinical studies
conducted to date by physicians on behalf of Cytogen, the imaging agents
have the potential to provide new and useful information not available from
other diagnostic modalities regarding the existence, location and extent of
the disease (and particularly occult disease not detected by other methods)
throughout the body. Cytogen believes that this information has the
potential to impact the way physicians manage their patients' individual
treatments. Cytogen also believes that, because its products use a very
low dose of one milligram or less of antibody conjugate per administration,
the products have the additional advantages of low manufacturing cost and
ease of administration. The imaging products are supplied to hospitals and
central radiopharmacies without the radioisotope. Prior to patient
administration, the radioisotope is attached by the radiopharmacist using a
simple liquid transfer procedure developed by Cytogen.
OncoScint CR/OV. OncoScint CR/OV was approved by FDA in the U.S. in
December 1992. This product was approved for single use with other
appropriate diagnostic tests to locate malignancies outside the liver in
patients with known colorectal or ovarian cancer. Prior to receipt of FDA
approval, Cytogen had completed additional clinical trials which support
repeat administration of the product, and submitted that data to FDA. To
date, FDA has not issued an approval or non-approval letter for this
expanded indication.
With respect to Europe, this data was also submitted to the Committee
for Proprietary Medicinal Products (the "CPMP"). In December 1993,
OncoScint CR/OV received CPMP approval for repeat administration and
ovarian cancer indications. Individual member country approvals must be
obtained before marketing under these new indications can be commenced.
OncoScint CR/OV in its colorectal single-dose application has been approved
for sale in eight Western European countries, including Germany, Italy, the
United Kingdom and France.
Currently, OncoScint CR/OV is being marketed in the U.S. by Cytogen.
Cytogen reacquired the U.S. marketing rights ("U.S. Rights") for the
product from Knoll Pharmaceutical Company ("Knoll") in November 1994. See
"Marketing and Sales -- Knoll Pharmaceutical". Cytogen also reacquired the
European marketing rights for OncoScint CR/OV from Chiron B.V., formerly
EuroCetus B.V., successor in interest to EuroCetus International, N.V.
("Chiron") in February 1995. See "Marketing and Sales --Chiron B.V.".
Because Cytogen is the first sponsor to obtain FDA marketing approval
for a monoclonal antibody-based ovarian cancer imaging product that has
been designated as an orphan drug by FDA, Cytogen is entitled to certain
exclusive marketing rights with respect to the product. See "Government
Regulation and Product Testing--Orphan Drug Act."
ProstaScint. ProstaScint is a monoclonal antibody that is being
developed as a radiolabeled imaging agent to detect the presence and extent
of prostate cancer. The product has been studied in three different
indications: presurgical, occult and repeat administration. The Phase III
clinical program for
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ProstaScint has been completed and the PLA was submitted to FDA in January
1995. Cytogen is pursuing a co-marketing partner for ProstaScint in the
U.S. and is also seeking international marketing alliances for the product.
Cancer Therapeutic Products
Samarium EDTMP. Samarium EDTMP is being developed as a treatment for
the pain associated with bone metastases, a condition that occurs when
cancer originates in or spreads to the bone. The first of two Phase III
studies for Samarium EDTMP, involving 117 patients, has been completed and
is currently being analyzed. The second Phase III study has enrolled over
100 patients thus far and is near completion. Based on a pre-NDA meeting
with FDA held in November 1994 and subsequent discussions with
representatives from the agency, Cytogen expects to file its NDA with
respect to this product in the first half of 1995.
Cytogen entered into an exclusive license agreement for the U.S. rights
to Samarium EDTMP from The Dow Chemical Company in March 1993 and assumed
responsibility for the development and commercialization of the product at
that time. See Note 5 to the Consolidated Financial Statements. In
December 1994, Cytogen granted to DuPont Merck a license with respect to
Cytogen's rights to Samarium EDTMP. See "Marketing and Sales -- Samarium
EDTMP".
Antibody-Based Cancer Therapeutics. Cytogen continues to develop
antibody-based, cancer therapeutics. These products utilize technology
similar to the Company's diagnostic products. However, in therapeutic
products the substance linked to the antibody is a radioisotope that
destroys tumor cells.
The therapeutic radioisotope, yttrium-90, is chemically attached to the
monoclonal antibodies using Cytogen's proprietary technology. It is
intended that the therapy products will be supplied to radiopharmacies
without the radioisotope, which will be attached by the radiopharmacist
using a simple procedure developed by Cytogen. The prostate therapy
product is in Phase I clinical trials. The ovarian therapy product has
completed Phase II clinical trials. Further development of this product is
currently under evaluation. Studies for the bladder therapy product were
suspended in 1993 because test results had not met the expectations of
Cytogen and CytoRad (defined below).
Research and Development
TSARs\SynGenes. Long-term research, much of which is preliminary, is
being conducted by the Company on TSARs\SynGenes. The TSARs\SynGenes
program consists of research on long peptides, which may be derived from
random peptide libraries, and long-term projects related to the discovery
of synthetic genes, called SynGenes. Cytogen believes its TSARs\SynGenes
technology may represent a significant advance over monoclonal antibody
delivery systems for certain applications. Cytogen is working,
independently and in collaboration with others, to develop this technology
into a new generation of product applications. TSARs\SynGenes have several
characteristics that represent potential advantages over whole antibody-
based products. With molecular weights of as low as 2,000 daltons, as
opposed to 150,000 daltons for a whole monoclonal antibody, TSARs\SynGenes
will travel quickly through the body and may reach more sites due to their
small size than could whole antibodies. TSARs\SynGenes can be chemically
synthesized, making their production simpler and less expensive than the
production of monoclonal antibodies, which are biologically produced and
then chemically modified. Another significant potential advantage of
TSARs\SynGenes may be that they are not expected to generate an immunologic
response (i.e., the body's immune system will not produce antibodies in
response to the introduction of TSARs\SynGenes, which could impair repeated
use of the product). Cytogen is the exclusive licensee of certain patent
applications and technology held by the University of North Carolina
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at Chapel Hill covering TSARs technology. Cytogen has filed patent
applications in the U.S. and certain foreign countries with respect to the
TSARs\SynGenes technology.
While a significant amount of basic research on TSARs\Syngenes
technology has been done by Cytogen, this technology is at an earlier stage
of development than the technology underlying the monoclonal antibody-based
products described above. Research on TSARs\SynGenes to date has focused
on (i) product development in the oncology area in conjunction with
Cytogen's future product development programs and (ii) additional areas of
basic research which, if successful, may become the foundation for products
outside of oncology and for out-licensing opportunities based on this
technology.
PSM. In 1993, Cytogen and Memorial Sloan-Kettering Cancer Center
("MSKCC") began a development program involving the prostate specific
membrane antigen ("PSM") and Cytogen's prostate cancer monoclonal antibody
conjugate, CYT-356. Work conducted by MSKCC has demonstrated that assays
looking for mRNA encoding PSM have the potential to detect circulating
cancer cells in the blood of patients at a higher rate than the well-known
and widely used screening techniques that utilize the prostate specific
antigen. This finding has the potential to be developed as a general blood
screening assay for prostate cancer. Cytogen and MSKCC are pursuing this
development program. Cytogen holds an exclusive option for an exclusive
license under certain patent applications and technology held by MSKCC
relating to PSM. Additionally, Cytogen is actively seeking license and
development agreements to support the PSM program. However, no assurances
can be given regarding the success or timing of these efforts.
Humanized Monoclonal Antibodies. Most of the monoclonal antibodies
currently used in developmental biotechnology products, including
Cytogen's, are derived from mice. While the results of Cytogen's research
to date indicate that immune response has not presented a safety question,
it is possible that the effectiveness of these products in some patients,
particularly in multiple-use applications, may be adversely affected by an
immunological response known as Human Anti-Mouse Antibody ("HAMA"). One
possible means of reducing the HAMA response is to graft the antigen
binding regions of a murine, or mouse, antibody into a human antibody
thereby creating a "humanized" monoclonal antibody. Cytogen is conducting
and/or sponsoring research to develop humanized antibodies that Cytogen
believes may improve the efficacy of its therapeutic products.
Other Applications. Cytogen believes that certain of the technologies
it is developing may have medical applications in various other areas,
including autoimmune disorders and infectious diseases. Cytogen intends to
expand the research and development of these technologies primarily through
strategic alliances with other entities. Cytogen expects to devote
resources to these other areas to the extent funding is available. No
prediction can be made, however, as to when or whether the areas of
research described above will yield new scientific discoveries, or whether
such research will lead to new commercial products.
Research and Development Funding
Research and development expenditures recorded by Cytogen reflect
projects conducted by the Company and payments made to sponsored research
programs and consultants. Cytogen's expenses for its research and
development activities (including customer sponsored programs) were $20.3
million, $24.8 million and $21.7 in fiscal years 1994, 1993 and 1992,
respectively. These expenses principally reflect product development
efforts and support for various ongoing clinical trials. Research and
development expenditures for customer sponsored programs, including
CytoRad, were $29,000, $9,112,000, and $8,868,000 in fiscal years 1994,
1993 and 1992, respectively.
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Marketing and Sales
OncoScint. Promotion of OncoScint CR/OV is targeted to hospital-based
physicians, including those who refer patients for imaging procedures and
those who obtain and interpret the image. Referring physicians are likely
to be surgeons and oncologists. Imaging physicians are nuclear medicine
specialists and those diagnostic radiologists who have subspecialty
training in nuclear medicine. After receipt of FDA approval in May 1993 of
Cytogen's marketing materials for OncoScint CR/OV, Cytogen began its
marketing in the U.S. through its own specialty sales force with an
expertise in nuclear medicine, and through a co-promotion arrangement with
Knoll, which agreement was terminated in 1994. See "Knoll Pharmaceutical".
Since May 20, 1994, Cytogen has been the sole marketer of OncoScint CR/OV
in the U.S. In 1989, Chiron was granted exclusive marketing and
distribution rights in Europe for OncoScint CR/OV, which rights were
reacquired in 1995 by the Company under the terms of a disengagement
agreement (the "Disengagement Agreement"). See "Chiron B.V."
OncoScint CR/OV is a very technical product that requires a high degree
of proficiency in nuclear imaging, as well as a thorough appreciation of
the information the scan can provide. The Company believes that this
information regarding the actual existence, location and extent of disease
has the potential to impact a physician's ability to make effective and
efficient patient management decisions.
Cytogen believes that sales of OncoScint CR/OV may be increased through
approval of repeat administration, which is currently pending with FDA,
implementation of better quality control at the time the image is actually
acquired and through greater assistance with the interpretation of the
scans. The Company is exploring advances in teleradiology in order to
improve the acquisition and interpretation of an OncoScint CR/OV scan. In
its strictest form, teleradiology provides real-time, two-way audio and
video communications by linking a radiology center with an off-site
radiology specialist. The use of teleradiology has advanced due to
improvements in related computer and telecommunication technologies.
Knoll Pharmaceutical. On November 1, 1994, Cytogen executed a
termination agreement (the "Termination Agreement") with Knoll. Pursuant
to the Termination Agreement, Cytogen has reacquired from Knoll all U.S.
Rights to OncoScint CR/OV, which were previously granted to Knoll pursuant
to a License, Supply and Marketing Agreement dated December 19, 1991 (the
"Knoll Agreement"). The Termination Agreement requires Cytogen to pay to
Knoll $3.0 million, without interest, over a four-year period, to reacquire
the U.S. Rights and reschedules the payment of approximately $5.0 million
of liabilities previously incurred under the terms of the Knoll Agreement.
Under the terms of an Order Fulfillment Agreement effective November 1,
1994, Knoll will continue to provide warehousing, shipping, invoicing and
collection services to Cytogen until June 30, 1995.
Under the terms of the Knoll Agreement, in fiscal years 1994 and 1993,
the Company incurred $412,000 and $5.1 million, respectively, in co-
promotion expenses, and recognized $430,000 and $977,000 in co-promotion
revenues. In fiscal year 1992, the Company recorded a milestone payment
from Knoll. In each of those fiscal years, the Company also recognized
revenues from the supply of commercial product to Knoll by the Company.
See Note 4 to the Consolidated Financial Statements.
Chiron B.V. On December 30, 1994, Cytogen entered into the
Disengagement Agreement with Chiron. Pursuant to a Distribution and
License Agreement dated as of October 21, 1989, as amended, Cytogen granted
to Chiron exclusive marketing and distribution rights in Europe (the
"European Rights") to OncoScint CR/OV. Under the Disengagement Agreement,
Cytogen reacquired the European Rights and purchased certain business
assets relating to the European Rights, including existing approvals by the
appropriate regulatory authorities to market OncoScint CR/OV in twelve
countries in Europe. This
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reacquisition was consummated on February 16, 1995. The reacquisition
price is $1 million, payable over three years, without interest, and
payment of the reacquisition price is secured by a mortgage covering
approximately 11 acres of undeveloped real property owned by Cytogen in
Ewing, New Jersey. This obligation is non-recourse to Cytogen. Until the
earlier of (i) an agreement with a new European distributor, or (ii)
December 31, 1995, Chiron will continue to provide warehousing and European
distribution services to Cytogen. Cytogen recognized contract and product
related revenue from Chiron of $162,000, $164,000 and $377,000 in the
fiscal years 1994, 1993 and 1992, respectively. See Note 9 to the
Consolidated Financial Statements.
In the U.S., Cytogen is considering maintaining its direct selling
efforts, as well as co-promotion arrangements or licensing of all rights to
a third party. Cytogen intends to secure alternative marketing and
distribution partners for OncoScint CR/OV in Europe and Japan.
Samarium EDTMP
DuPont Merck. On December 20, 1994, Cytogen entered into a license
agreement (the "DP/Merck Agreement") with DuPont Merck. Under the terms of
the DP/Merck Agreement, Cytogen granted to DuPont Merck a license with
respect to Cytogen's rights to Samarium EDTMP pursuant to which DuPont
Merck will have responsibility for manufacturing and co-marketing Samarium
EDTMP in the U.S., if and when approved for marketing by FDA. See "Cancer
Therapeutic Products -- Samarium EDTMP".
The DP/Merck Agreement provides that Cytogen will receive from DuPont
Merck up-front fees and milestone payments consisting of: (i)$1.0 million
upon execution of the DP/Merck Agreement, which has been paid to Cytogen;
(ii) $4.0 million from the sale to DuPont Merck of 908,265 shares of
Cytogen common stock within 20 days of the execution of the DP/Merck
Agreement, which sale has occurred, (iii) $4.25 million to fund additional
clinical programs to expand the use and marketing of Samarium EDTMP, of
which $1,334,000 was received in January 1995, (iv) a $2.0 million
milestone payment if and when Samarium EDTMP receives FDA approval and (v)
royalty payments based on sales, including guaranteed minimum payments.
Relationship and Subsequent Merger with CytoRad
CytoRad Incorporated ("CytoRad"), a biopharmaceutical company formed in
December 1991, was established to engage in the research and development of
proprietary antibody-based delivery systems for the diagnosis and/or
treatment of prostate, ovarian and bladder cancers, utilizing technology
licensed from Cytogen. In February 1992, Cytogen and CytoRad commenced a
public offering of 4,025,000 CytoRad units, each unit consisting of one
share of callable common stock of CytoRad and one warrant to purchase one
share of Cytogen common stock at $24.15 per share. All of the net proceeds
of the offering were paid to CytoRad. In connection with the public
offering, Cytogen and CytoRad entered into a series of contractual
arrangements. Subject to the terms and conditions of the agreements
between Cytogen and CytoRad, CytoRad was required to make up-front and
periodic payments to Cytogen, and in return Cytogen conducted research and
development on behalf of CytoRad relating to the products licensed pursuant
to agreements. As a result of the agreements, Cytogen recorded $5,903,000
and $6,064,000 of contract revenues in fiscal years 1993 and 1992,
respectively, in addition to $2.0 million and $3.0 million in up-front
license fees received from CytoRad in fiscal years 1993 and 1992,
respectively.
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In March 1994, CytoRad announced that it was exploring modifications to
its then existing business relationship with Cytogen. Accordingly, the
CytoRad Board of Directors did not approve the 1994 development agreement
budget and subsequently, no contract revenues from CytoRad were recorded by
Cytogen in fiscal year 1994. During fiscal years 1993 and 1992, funds
provided under those agreements represented the principal source of funding
for the development of the products involved. See Note 3 to the
Consolidated Financial Statements.
On July 29, 1994, Cytogen and CytoRad jointly announced that they had
reached an agreement in principle relating to the acquisition of CytoRad by
Cytogen, and on November 15, 1994, the parties announced that they had
signed a definitive agreement relating thereto. Pursuant to the merger
agreement, Cytogen offered to exchange for each CytoRad unit (a) 1.5 shares
of Cytogen common stock, (b) a warrant to acquire one share of Cytogen
common stock for $8.00 that expires January 31, 1997 and (c) a contingent
value right (a "CVR") to receive, under certain circumstances and at no
additional cost, up to an additional one-half share of Cytogen common
stock.
On February 24, 1995, Cytogen announced that it had completed the
exchange offer, pursuant to which approximately 93% of the outstanding
CytoRad units were validly tendered. On February 27, 1995, Cytogen
announced that it had completed its acquisition of CytoRad by merging
CytoRad with and into a wholly-owned subsidiary of Cytogen pursuant to the
merger agreement. Holders of CytoRad common stock who did not tender their
CytoRad units in the exchange offer became entitled to receive as a result
of the merger one and one-half shares of Cytogen common stock and one CVR
for each share of CytoRad common stock owned thereby. Although the
previously issued warrants forming a part of the CytoRad units not tendered
in the exchange offer will remain outstanding following the merger, Cytogen
has agreed that such warrants will be exercisable at $8.00 per warrant
share pursuant to the merger agreement.
The stockholders of Cytogen were required to approve the issuance of the
Cytogen securities issuable in connection with the acquisition, which
approval was obtained on February 23, 1995. As a result of the
acquisition, Cytogen reacquired the product rights to the prostate, ovarian
and bladder products it had previously licensed to CytoRad. In addition,
consummation of the merger resulted in the transfer of $11.7 million of
CytoRad's cash and securities to the Company. See Note 3 to the
Consolidated Financial Statements.
Limited Field of Use License Agreements
In addition to development of its own proprietary products, Cytogen has
entered into limited field of use licenses for rights in its proprietary
technology with various pharmaceutical companies in the U.S. and Europe.
Although the terms of each agreement differ, these agreements generally
provide for royalty payments to Cytogen based on any future product sales.
Some of these agreements also provide for fixed payments, purchases of
Cytogen stock, milestone payments and payments for research services
performed by Cytogen.
Lilly. In April 1989, Cytogen entered into limited field of use license
agreements with Eli Lilly and Company ("Lilly") (collectively, the "Lilly
Agreement") granting to Lilly a non-exclusive worldwide license to develop
and market certain cancer therapy products using Cytogen's proprietary
monoclonal antibody linker technology to deliver the vinca alkaloid class
of compounds, and other cancer therapy drugs proprietary to Lilly.
Pursuant to the terms of the Lilly Agreement, in addition to the cash
payment and stock purchase already made, Lilly is required to make certain
payments to Cytogen which in some cases are dependent upon Lilly's
achievement of certain scientific milestones in its research. The Lilly
Agreement also provides for royalty payments (which are subject to
abatement to a certain extent based
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on milestone payments made) based on net sales of any resulting products.
Under the Lilly Agreement, Cytogen is required to inform Lilly of
improvements to Cytogen's technology and Lilly can terminate the Lilly
Agreement at any time following the milestone payments described above upon
60 days' prior notice.
Bracco. In September 1989, Cytogen entered into an agreement (the
"Bracco Agreement") with Bracco Industria Chimica S.p.A. ("Bracco")
granting Bracco an exclusive option to license magnetic resonance imaging
enhancement agents using the Company's linking technology. Cytogen
recognized revenue from Bracco pursuant to the Bracco Agreement for
research services equal to $41,000, $860,000 and $1,343,000 in fiscal years
1994, 1993 and 1992, respectively. Cytogen does not anticipate that it
will receive any additional revenues under the Bracco Agreement. See Note
10 to the Consolidated Financial Statements.
Sterling. In April 1986, Cytogen entered into a limited field of use
license agreement with Eastman Kodak Company ("Kodak"), the rights and
obligations of which were subsequently assigned by Kodak to its subsidiary,
Sterling Drug Inc. ("Sterling"), under an amended and restated agreement
with Sterling in April 1989 (the "Sterling Agreement"). Cytogen terminated
the research arrangements under the Sterling Agreement in July 1992.
Cytogen also has given Sterling notice terminating the Sterling Agreement
and the parties are currently negotiating the terms and conditions of such
a termination. Cytogen recognized revenues under the Sterling Agreement
from sales of research services of $583,000 in fiscal year 1992.
Other Agreements. Cytogen also has limited field of use license
agreements with American Cyanamid Company and Farmitalia Carlo Erba S.r.l.
("FICE"). The American Cyanamid agreement relates to development,
manufacture and sale of products utilizing Cytogen's proprietary monoclonal
antibody-based delivery system to deliver to tumor sites certain
chemotherapeutics such as methotrexate, and certain other compounds, some
of which are proprietary to American Cyanamid. Cytogen does not anticipate
receiving payments under the Cyanamid agreement in the near future.
Cytogen's limited field of use license agreement with FICE relates to
manufacture and marketing of monoclonal antibody-based anthracycline
chemotherapeutic products. At the present time the parties to the FICE
agreement are discussing its termination. In addition, Cytogen also has
entered into license agreements pursuant to which Cytogen sponsors certain
research programs for the development of certain antibodies, antibody
fragments, antigens and other protein products.
Manufacturing
Cytogen has established limited commercial-scale manufacturing capacity
in Princeton, New Jersey. An Establishment License Application ("ELA") for
the facility in Princeton utilized by Cytogen for production of OncoScint
CR/OV was approved by FDA in December 1992. It is expected that this
facility will allow Cytogen to meet its projected production requirements
for the OncoScint product line in both the U.S. and Europe for the near
term, although no assurances can be given to that effect. In 1993 and
1994, Cytogen received additional regulatory approval from FDA for the
expansion of its commercial manufacturing processes and facilities.
Cytogen will be required to obtain regulatory approval for all of its
commercial manufacturing processes and facilities.
In 1994, Cytogen's manufacturing facility was expanded to provide
processes and facilities for the manufacture of commercial quantities of
the antibody used in ProstaScint. An ELA Supplement was prepared in 1994
in conjunction with the PLA for ProstaScint submitted to FDA in January
1995. After receipt of necessary regulatory approvals, Cytogen's facility
will be the site for the commercial manufacture of ProstaScint. It is
expected that this facility will allow Cytogen to manufacture its
-10-
<PAGE>
projected production requirements of ProstaScint for the near term,
although no assurance can be given that the facility will receive the
necessary regulatory approvals to produce commercial quantities of
antibodies for ProstaScint, or that commercial quantities of antibodies
will be otherwise obtained.
Raw Materials
The raw materials used in the manufacture of Cytogen's products include
several different antibodies. Cytogen has both exclusive and non-exclusive
license agreements which permit the use of specific monoclonal antibodies
in its products. Cytogen's first product, OncoScint CR/OV, uses the same
monoclonal antibody which has been supplied in clinical quantities and is
being supplied in commercial quantities by a single contract manufacturer
through a shared manufacturing agreement. Cytogen anticipates that the
supplier will be able to meet Cytogen's needs for commercial quantities of
monoclonal antibody. Cytogen currently has established a substantial
inventory of monoclonal antibodies used in OncoScint CR/OV. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 1 to the Consolidated Financial Statements.
Cytogen currently has the in-house production capacity necessary to
produce projected commercial quantities of monoclonal antibody for
manufacture of ProstaScint and clinical quantities of other monoclonal
antibodies to develop other diagnostic imaging and therapy products.
Human Resources
As of December 31, 1994, Cytogen employed 137 persons full-time, of whom
47 were engaged in research and development activities, 38 were engaged in
operations and manufacturing, 29 were engaged in administration and
management, and 23 were engaged in selling and marketing. Of Cytogen's
employees, 19 hold Ph.D. and/or M.D. degrees, and 17 hold other advanced
degrees. Cytogen, from time to time, hires scientific consultants to work
on certain of its research and development programs. Cytogen believes that
it has been successful in attracting skilled and experienced scientific
personnel; however, competition for such personnel is intense.
None of Cytogen's employees is covered by a collective bargaining
agreement. All of Cytogen's employees have executed confidentiality
agreements. Cytogen considers relations with its employees to be
excellent.
Patents and Proprietary Rights
Consistent with industry practice, Cytogen has a policy of using patent
and trade secret protection to preserve its right to exploit the results of
its research and development activities and, to the extent it may be
necessary or advisable, to exclude others from appropriating Cytogen's
proprietary technology.
Cytogen's policy is to aggressively protect its proprietary technology
by selectively seeking patent protection in a worldwide program. In
addition to the U.S., Cytogen files patent applications in Canada, major
European countries, Japan and additional foreign countries on a selective
basis to protect inventions important to the development of its business.
Cytogen believes that the countries in which it has obtained and is seeking
patent coverage for its proprietary technology represent the major focus of
the pharmaceutical industry in which Cytogen and certain of its licensees
will market its and their respective products.
-11-
<PAGE>
Cytogen holds 13 current U.S. patents and 46 current foreign patents.
Cytogen has filed and currently has pending ten U.S. patent applications
and 20 foreign patent applications, covering certain aspects of its
technology for diagnostic and therapeutic products, and the methods for
their production and use. Cytogen intends to file patent applications with
respect to subsequent developments and improvements when it believes such
protection is in the best interest of Cytogen. Although the scope of
patent protection which ultimately may be afforded by the patents and
patent applications of Cytogen is difficult to quantify, Cytogen believes
its patents will afford adequate protection to conduct its business
operations as described in this Form 10-K.
Cytogen's U.S. Patent No. 4,671,958, entitled "Antibody Conjugates For
The Delivery of Compounds To Target Sites," is basic to many of Cytogen's
current and proposed commercial operations. This patent covers in vivo
delivery methods using site-specific attachment of compounds to antibody
molecules that maintain the antibody's ability to target and bind to
antigens such as those expressed by or associated with tumors, blood clots,
infections and other disease sites. This patent is scheduled to expire in
2004. In Europe, similar protection is afforded by Cytogen's European
Patent No. 0088695, entitled "Antibody Conjugates."
Cytogen's U.S. Patent No. 4,741,900, entitled "Antibody Metal Ion
Complexes," provides additional patent protection for its most advanced
products which involve the targeting of radioisotopes to tumor cells for
purposes of diagnosing or treating cancer. This patent is scheduled to
expire in 2004. Cytogen's European Patent No. 0173629, entitled "Antibody
Metal Ion Complexes" affords similar protection in Europe.
Cytogen's U.S. Patent No. 4,867,973, entitled "Antibody-Therapeutic
Agent Conjugates," provides broad patent protection for many of Cytogen's
proposed commercial products and those of its licensees which are useful
for the in vivo targeting of therapeutic agents for the treatment of a
variety of cellular disorders. This patent is scheduled to expire in 2004.
Cytogen is the exclusive licensee of certain patent applications held by
the University of North Carolina at Chapel Hill covering TSARs technology.
Cytogen holds an exclusive option for an exclusive license under certain
patent applications held by MSKCC covering PSM. Cytogen is the exclusive
licensee of certain U.S. patents and applications held by Dow covering
Samarium EDTMP.
Cytogen may be entitled under certain circumstances to seek extension of
the terms of its patents. See "Government Regulation and Product Testing--
FDA Approval".
Cytogen also relies upon, and intends to continue to rely upon, trade
secrets, unpatented proprietary know-how and continuing technological
innovation to develop and maintain its competitive position. Cytogen
typically enters into confidentiality agreements with its licensees and any
scientific consultants, and Cytogen's employees have entered into
agreements with Cytogen requiring that they forbear from disclosing
confidential information of Cytogen, and assign to Cytogen all rights in
any inventions made while in Cytogen's employ relating to Cytogen's
activities. Cytogen believes that its valuable proprietary information is
protected to the fullest extent practicable; however, there can be no
assurance that (i) any additional patents will be issued to Cytogen in any
or all appropriate jurisdictions, (ii) litigation will not be commenced
seeking to challenge Cytogen's patent protection or such challenges will
not be successful, (iii) processes or products of Cytogen do not or will
not infringe upon the patents of third parties, or (iv) the scope of
patents issued to Cytogen will successfully prevent third parties from
developing similar and competitive products. It is not possible to predict
how any patent litigation will affect Cytogen's efforts to develop,
manufacture or market its products.
-12-
<PAGE>
The technology applicable to Cytogen's products is developing rapidly.
A substantial number of patents have been issued to biotechnology
companies. In addition, competitors have filed applications for, or have
been issued, patents and may obtain additional patents and proprietary
rights relating to products or processes competitive with those of Cytogen.
In addition, others may have filed patent applications and may have been
issued patents to products and to technologies potentially useful to
Cytogen or necessary to commercialize its products or achieve its business
goals. There can be no assurance that Cytogen will be able to obtain
licenses of such patents on terms acceptable to Cytogen.
To the best of Cytogen's knowledge, there are no valid enforceable U.S.
patents which it believes to be infringed by its present activities
relating to its site-specific antibody linker technology or which would
preclude the pursuit of its business activities as discussed in this Form
10-K. Cytogen has no knowledge which would rebut the statutory presumption
of validity of its material U.S. patents identified above or which would
preclude the enforceability of such patents, or of any materially relevant
prior art references not cited in the U.S. Patent and Trademark Office.
OncoScint is a registered trademark of Cytogen. ProstaScint is a
trademark of Cytogen, pending registration.
Government Regulation and Product Testing
The development, manufacture and sale of medical products utilizing
Cytogen's technology are governed by a variety of statutes and regulations
in the U.S. and by comparable laws and agency regulations in most foreign
countries.
FDA Approval. The major regulatory impact on the diagnostic and
therapeutic products in the U.S. derives from the Federal Food, Drug and
Cosmetic Act (the "FD&C Act") and the Public Health Service Act, and from
FDA rules and regulations promulgated thereunder. These acts and
regulations require carefully controlled research and testing of products,
government review and/or approval prior to marketing the products,
inspection and/or licensing of manufacturing and production facilities,
adherence to good manufacturing practices during production and continued
compliance with product specifications, labeling, and other post-production
regulations.
The medical products to which Cytogen intends to apply its technology
are subject to substantial governmental regulation and may be classified as
new drugs or biologics under the FD&C Act. FDA and similar health
authorities in most other countries must approve or license the diagnostic
and therapeutic products before they can be commercially marketed. In
order to obtain FDA approval, an applicant must submit, as relevant for the
particular product, proof of safety, purity, potency and efficacy. In most
cases such proof entails extensive pre-clinical, clinical and laboratory
tests. The testing, preparation of necessary applications and processing
of those applications by FDA is expensive and time-consuming, and may take
several years to complete. Cytogen received FDA approval in December 1992
to market OncoScint CR/OV in the U.S., together with approval of its ELA
with respect to its manufacturing facility in New Jersey. Although Cytogen
believes its future applications will be approved, there is no assurance
FDA will act favorably or quickly in making such reviews and approving
products for sale. Difficulties or unanticipated costs may be encountered
by Cytogen or its licensees in their respective efforts to secure necessary
governmental approval or licenses, which could delay or preclude Cytogen or
its licensees from marketing their products. Limited indications for use
or other conditions could also be placed on any such approvals that could
restrict the commercial applications of such products. With respect to
patented products or technologies, delays imposed by the government
approval process may materially reduce the period during which Cytogen will
have the exclusive right to exploit them, because patent protection lasts
only for a limited time, beginning on the date the patent is first granted
in the case of U.S. patent
-13-
<PAGE>
applications and when the patent application is first filed in the case of
patent applications filed in the European Economic Community. Cytogen
intends to seek to maximize the useful life of its patents under the Patent
Term Restoration Act of 1984 in the U.S. and similar laws if available in
other countries.
The majority of the diagnostic and therapeutic products will likely be
classified as new drugs or biologics and will be subject to the conduct of
in vitro tests, pre-clinical testing and a three-phase evaluation process
in humans before any marketing application can be prepared. In Phase I, a
product is tested in a small number of patients primarily for safety at one
or more dosages. In Phase II, in addition to safety, the efficacy of the
product against particular diseases is evaluated in a patient population
generally somewhat larger than Phase I. Clinical trials of certain
diagnostic agents frequently combine Phase I and Phase II into a single
Phase I/II study. In Phase III, the product is evaluated in a larger
patient population sufficient to generate data to support a claim of safety
and efficacy within the meaning of the FD&C Act. Authorization or
clearance under the FD&C Act by FDA must be obtained prior to conducting
clinical testing by the filing of an exemption for an Investigational New
Drug which includes the results of in vitro tests and pre-clinical testing.
A similar procedure under the FD&C Act applies to medical devices and
diagnostic products.
A PLA summarizes the results of clinical tests and other product testing
and must be filed with an ELA for the licensing of the product
manufacturing processes and facilities for biologics such as OncoScint
CR/OV. An NDA, which is similar to a PLA, may be required to be filed if
the product is classified as a drug rather than a biologic.
Prior to a PLA or NDA submission, FDA conducts a pre-PLA/NDA meeting.
The use of pre-PLA/NDA meetings has increased due to the introduction of
FDA User Fees and the increased commitment on the part of FDA to conduct
timely reviews of filed applications. The primary purpose of both the pre-
PLA and pre-NDA meeting is for the sponsor and FDA to discuss the content
and timing of the application and determine whether FDA agrees with the
sponsor, based on its preliminary review of the application, that the
application is sufficiently complete to be filed and/or to identify any
areas that need further evaluation or discussion prior to the filing.
A pre-PLA/NDA meeting has the potential to avoid an FDA issued "refuse-
to-file" letter that states the application is "deficient on the face" and
cannot be reviewed in its present form. Based on FDA regulations, once an
application is submitted to FDA, FDA has 60 days to determine whether or
not the application is sufficiently complete to be filed. If FDA believes
the application is not complete, FDA issues a refuse-to-file letter to the
sponsor.
Continued compliance with all requirements of the FD&C Act and the
conditions in an approved application, including but not limited to product
specification, manufacturing process, labeling and promotional material,
and record keeping and reporting requirements, is necessary for all
products. Failure to comply, or the occurrence of unanticipated adverse
effects during commercial marketing, could lead to the need for product
recall, or FDA-initiated action, which could delay further marketing until
the products are brought into compliance. Similar laws and regulations
apply in most foreign countries where the diagnostic and therapeutic
products are likely to be marketed.
Upon certain circumstances defined in the FD&C Act, certain products may
be sold and distributed, in limited quantities, prior to receipt of final
FDA approval. Cytogen believes that certain of its products may qualify
for such treatment; however, there can be no assurance that FDA will allow
such sales or distribution.
-14-
<PAGE>
Orphan Drug Act. The Orphan Drug Act is intended to provide incentives
to manufacturers to develop and market drugs for rare diseases or
conditions affecting fewer than 200,000 persons in the U.S. at the time of
application for orphan drug designation. A drug that receives orphan drug
designation and is the first product to receive FDA marketing approval for
a particular indication is entitled to orphan drug status, a seven-year
exclusive marketing period in the U.S. for that indication. OncoScint
CR/OV, in its ovarian application, has been designated an orphan drug.
Under the Orphan Drug Act, the FDA cannot approve any application by
another party to market an identical product for treatment of an identical
indication unless (i) such party has a license from the holder of orphan
drug status, or (ii) the holder of orphan drug status is unable to assure
an adequate supply of the drug. However, a drug that is considered by FDA
to be different from a particular orphan drug is not barred from sale in
the U.S. during such seven-year exclusive marketing period even if it
receives marketing approval for the same product claim.
Other Regulations. In addition to regulations enforced by FDA, Cytogen
is also subject to regulation under the Occupational Safety and Health Act,
the Environmental Protection Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, Nuclear Regulatory Commission and
other present and potential future federal, state or local regulations.
Foreign Regulatory Approval. Prior to marketing its products in Western
Europe and certain other countries, Cytogen will be required to receive the
favorable recommendation of the CPMP followed by the appropriate government
agencies of the respective countries. Substantial requirements, comparable
in many respects to those imposed under the FD&C Act, will have to be met
before commercial sale is permissible in most countries. There can be no
assurance, however, as to whether or when governmental approvals (other
than those already obtained) will be obtained or as to the terms or scope
of those approvals.
Competition
The biopharmaceutical field is expected to continue to undergo rapid and
significant technological change as well as extensive consolidation.
Potential competitors in the U.S. are numerous and include pharmaceutical,
chemical, biotechnology and medical device companies, many of which have
substantially greater capital resources, marketing experience, research and
development staffs and facilities than Cytogen. This competition can be
expected to become more intense as commercial applications for
biotechnology and pharmaceutical products increase. Some of these
companies may be better able than Cytogen to develop, refine and market
products based on monoclonal antibody-based technology, or on other
technologies applicable to the diagnosis and treatment of cancer such as CT
scanning, magnetic resonance imaging, and chemotherapeutic products.
Cytogen is aware that several companies are engaged in the development of
technology and products for targeted radioisotopic and drug delivery.
Cytogen understands that certain of these competitors are in the process of
conducting human clinical trials or have filed applications for marketing
approval by government agencies of certain products which will compete with
Cytogen's diagnostic and therapeutic products. Pursuant to its limited
field of use license agreements, Cytogen has granted certain rights to its
licensees to develop and market cancer therapy products which may compete
directly with Cytogen's diagnostic and therapeutic products. Cytogen will
receive royalties from any sale of such licensed products and Cytogen
believes the information which presently is publicly available is
insufficient to enable it to definitively evaluate the likely success of
these competing products. Cytogen depends principally upon its patented
antibody-based linker technology to compete with other firms engaged in
commercial applications of antibody technology. For this reason, Cytogen
has focused on those applications where it believes its technology will
offer significant advantages over other existing technologies and its
patents offer the most protection.
-15-
<PAGE>
Item 2. Properties
The Company currently leases approximately 107,700 square feet of
administrative, laboratory and manufacturing space in three locations in
Princeton, New Jersey. The lease for its 56,900 square foot laboratory and
manufacturing facility will expire on February 28, 2003 and provides two 5-
year renewal options. The Company has sub-leased 8,715 square feet of the
laboratory facility to another company. This sub-lease will expire in
April 30, 1996. The lease for the Company's 31,400 square foot office
space in Princeton, New Jersey will expire on June 15, 1997, subject to the
Company's right to renew through June 15, 2002. The Company also leases an
additional 19,400 square feet at a third location in Princeton, New Jersey,
under a lease which will expire in December 1999. This third location is
used for laboratories and support for production of commercial product.
The Company expects to remain in the Princeton, New Jersey area for the
foreseeable future. As of December 31, 1994, the Company had invested
approximately $9.0 million for improvements in the buildings it occupies.
The Company leases some of the equipment used in its laboratory and
manufacturing facility. See Note 17 to Consolidated Financial Statements
included in this Form 10-K for information regarding the Company's
obligations under these real property and equipment leases.
The Company believes its facilities are in good operating condition and
that all real property and equipment are adequate for all present and
proposed uses thereof.
Item 3. Legal Proceedings
On September 17, 1992, a class action complaint was filed in the United
States District Court for the District of New Jersey against the Company
and three individual defendants, George W. Ebright, Thomas J. McKearn and
Martin D. Cleary, alleging violations of Sections 10(b) and 20 of the
Exchange Act and Rule 10b-5 promulgated thereunder. At the time the
complaint was filed, Messrs. Ebright, McKearn and Cleary served as officers
of the Company and Messrs. Ebright and McKearn served as directors of the
Company. The complaint alleged that certain statements relating to the
marketing and distribution in Europe of the Company's colorectal cancer
imaging product were false and misleading, and sought damages in an
unspecified amount. The Company and the individual defendants denied any
wrongdoing.
On August 19, 1994, an Order was entered by Judge Hughes, United States
District Court for the District of New Jersey, which preliminarily approved
a settlement between the parties subject to a final hearing to determine
whether the settlement was fair, reasonable and adequate. At a hearing
held on November 18, 1994, Judge Hughes gave final approval to the
settlement, which provides for a $1,950,000 cash payment (which includes
approximately $900,000 of fees and expenses of plaintiffs' counsel), the
issuance of 197,942 shares of the Company's common stock and an additional
$500,000 payable if the Company has annual earnings per share of $.50 or
greater during any fiscal year commencing with 1993 through 1996. The cost
of the settlement was recorded as a liability at January 1, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their respective ages
and positions with the Company as of March 1, 1995 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
William C. Mills III 39 Chairman of the Board
Thomas J. McKearn 46 Chief Executive Officer and President
T. Jerome Madison 54 Vice President and Chief Financial Officer
James R. Knill 61 Vice President, Medical Affairs
Richard Murawski 46 Vice President, Operations
Pamela M. Murphy 44 Vice President, Corporate Communications
John D. Rodwell 48 Vice President, Research and Development
Richard J. Walsh 51 Vice President of Corporate Development
</TABLE>
All executive officers are elected annually by the Board of
Directors. There is no family relationship among any of the executive
officers or directors.
Business Experience
William C. Mills III has served as Chairman of the Board of the
Company since January 1995 and has been a director of the Company since
July 1983. Since April 1, 1988, he has been a General Partner of The
Venture Capital Fund of New England, Boston, Massachusetts, a series of
private venture capital partnerships. Prior to that, Mr. Mills was a
General Partner of PaineWebber Ventures, and certain of its predecessor
partnerships since April 1981. Mr. Mills also currently serves as a
director of Spectrian Inc., a wireless communications equipment company.
Mr. Mills holds an A.B. degree from Princeton University, an S.M. degree in
Chemistry from The Massachusetts Institute of Technology, and an S.M.
degree in Management from M.I.T.'s Sloan School of Management.
Thomas J. McKearn joined the Company in July 1981 as Vice
President, Research and Development. He has served as the Company's Chief
Executive Officer since January 1994 and as President of the Company since
September 1991. Dr. McKearn previously served as Executive Vice President
of the Company from June 1990 to August 1991 and Senior Vice President,
Scientific Affairs of the Company through June 1990. He has been a
director of the Company since 1981. From 1978 until he joined the Company,
Dr. McKearn was an Assistant Professor in the Department of Pathology at
the University of Pennsylvania and Head of the Immunoprotein Laboratory at
the Hospital of the University of Pennsylvania. He retains a position as
Adjunct Associate Professor in the Department of Pathology at the
University of Pennsylvania. Dr. McKearn is a member of the Scientific
Advisory Boards for Rider College and the New Jersey Cancer Institute. Dr.
McKearn holds a B.A. degree from Indiana University, a Ph.D. degree in
Immunology from the University of Chicago and an M.D. degree from the
Pritzker School of Medicine at the University of Chicago.
T. Jerome Madison joined the Company in October 1993 as Vice
President of Finance, Chief Financial Officer and Secretary. He has been a
director of the Company since December 1994. Mr. Madison is the sole
stockholder, officer and director of Somerset Central Corporation, a New
Jersey
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<PAGE>
corporation through which Mr. Madison provides services to the Company.
Previously, Mr. Madison served as President, Chief Executive Officer and
General Partner of Montgomery Partners, a venture capital group, from 1991
to 1993 and as President, Chief Executive Officer and General Partner of
Founders Court, also a venture capital group, from 1986 to 1991. Mr.
Madison was Vice President for finance and administration of the Company
from 1982 to 1986. Prior to first joining the Company, he served as
Corporate Controller for Rorer Group Inc. Mr. Madison holds a B.S. from
The Wharton School of the University of Pennsylvania and an M.B.A. from
Monmouth College. He also is a Certified Public Accountant.
James R. Knill joined the Company in January 1994 as Vice
President of Medical Affairs. From 1988 to 1993, Dr. Knill served as
Senior Advisor to the Bristol-Myers Squibb Research Institute. Dr. Knill
also served as Senior Vice President of Science Strategy and Planning of
Squibb Corporation, where he was employed from 1967 to 1988. Dr. Knill
holds an M.D. degree and an M.S. degree from the University of Western
Ontario, London, Ontario, and an M.B.A. degree from The Wharton School of
the University of Pennsylvania.
Richard Murawski joined the Company in April 1994 as Vice
President, Operations. Mr. Murawski served as Vice President, Operations
for Immunomedics, a biopharmaceutical company engaged in the development of
antibody products for cancers and infectious diseases, from 1993 to 1994
and as Director of Manufacturing and Director of Operations with
Welgen/Wellcome from 1990 to 1992. From 1971 through 1990, Mr. Murawski
held numerous positions in the areas of production, engineering and
manufacturing at Schering Corporation, a Union, New Jersey research-based
company engaged in the manufacture and production of pharmaceutical and
health care products. He holds a B.S. in Chemical Engineering from Newark
College of Engineering (currently New Jersey Institute of Technology).
Pamela M. Murphy joined the Company in March 1994 as Vice
President, Corporate Communications. Ms. Murphy served as Vice President,
Corporate Administration from 1990 to 1994 for Greenwich Pharmaceuticals
("Greenwich"), a development stage company seeking treatments for
autoimmune diseases. From 1987 to 1990, Ms. Murphy held the position of
Director of Corporate Communications with Greenwich. Prior to that, Ms.
Murphy held various regional and national positions with multiple
publishing corporations. Ms. Murphy holds a B.S. degree in Education and
Psychology from Northern Arizona University.
John D. Rodwell joined the Company in September 1981. He served
as Director, Chemical Research of the Company and then as Vice President,
Discovery Research of the Company, from 1984 until January 1989, at which
time he assumed his present responsibilities as Vice President, Research
and Development of the Company. From 1980 to 1981, Dr. Rodwell was a
Research Assistant Professor and, from 1976 to 1980, he was a postdoctoral
fellow, both in the Department of Microbiology at the University of
Pennsylvania School of Medicine, where he currently is an Adjunct Associate
Professor in the Department of Microbiology. He holds a B.A. degree from
the University of Massachusetts, an M.S. degree in Organic Chemistry from
Lowell Technology Institute and a Ph.D. degree in Biochemistry from the
University of California at Los Angeles.
Richard J. Walsh joined the Company in June 1994 as Vice President of
Corporate Development. Mr. Walsh served as Vice President of Biotechnology
Acquisitions for American Cyanamid Company from 1992 to 1994. Prior to
that position, for six years he was Vice President, Product Licensing and
Technology Transfer at The Warner-Lambert Company. From 1967 through 1986,
Mr. Walsh held a variety of domestic and international sales, marketing and
licensing positions within Parke-Davis and its parent, The Warner-Lambert
Company. Mr. Walsh holds a B.S. degree in Pharmacy from the University of
Cincinnati.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock is traded in the over-the-counter market
and is quoted on the NASDAQ National Market System under the trading symbol
"CYTO."
The table below sets forth the high and low sale prices for the
Company's Common Stock for each of the calendar quarters indicated, as
reported by the NASDAQ National Market System. The quotations shown
represent interdealer prices without adjustment for retail markups,
markdowns or commissions, and may not necessarily reflect actual
transactions.
<TABLE>
<CAPTION>
1993 High Low
- - ---- ---- ---
<S> <C> <C>
First Quarter......................................... 23 10-1/4
Second Quarter........................................ 13-1/2 9-3/4
Third Quarter......................................... 12-1/2 4-7/8
Fourth Quarter........................................ 8-7/8 5-5/8
1994 High Low
- - ---- ---- ---
First Quarter......................................... 6-5/8 3-1/4
Second Quarter........................................ 6-1/8 3
Third Quarter......................................... 5-1/2 3-1/8
Fourth Quarter........................................ 4-1/16 2-7/16
</TABLE>
As of March 1, 1995, there were approximately 2,591 holders of record of
the Common Stock.
The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Declaration of dividends on the
Common Stock will depend, among other things, upon future earnings, the
operating and financial condition of the Company, its capital requirements,
and general business conditions.
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<PAGE>
Item 6. Selected Financial Data
The following selected financial information has been derived from the
financial statements of the Company for each of the five fiscal years in the
period ended December 31, 1994, which have been audited by Arthur Andersen LLP,
Cytogen's independent public accountants. The financial summaries set forth
below should be read in conjunction with the financial statements, including the
notes thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other information provided elsewhere in this report.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
(All amounts in thousands, except per share data)
Consolidated Statements of
Operations Data:
Revenues $ 2,458 $ 10,354 $ 13,367 $ 7,022 $ 1,974
--------------------------------------------------
Research and development 20,321 24,844 21,680 21,293 16,942
Selling and marketing 5,536 9,399 2,679 1,290 703
Reacquisition of technology
and marketing rights 4,647 - - - -
General and administrative 4,290 7,016 5,394 3,612 4,395
--------------------------------------------------
Operating expenses 34,794 41,259 29,753 26,195 22,040
Loss from operations $ (32,336)$ (30,905)$ (16,386)$ (19,173)$ (20,066)
Gain (loss) on investments, net (470) 1,676 3,447 3,829 2,727
--------------------------------------------------
Net loss (32,806) (29,229) (12,939) (15,344) (17,339)
--------------------------------------------------
Dividends on preferred stock - - (1,293) (1,725) (1,725)
--------------------------------------------------
Net loss to common stockholders $ (32,806)$ (29,229)$ (14,232)$ (17,069)$ (19,064)
==================================================
Net loss per common share $ (1.38)$ (1.38)$ (0.75)$ (0.98)$ (1.36)
==================================================
Weighted average common shares
outstanding 23,822 21,121 18,994 17,345 13,971
==================================================
Consolidated Balance Sheets Data:
Cash and short term investments $ 7,700 $ 23,764 $ 35,738 $ 54,506 $ 39,835
Total assets 19,690 34,635 52,775 64,471 47,082
Long term liabilities 4,310 192 276 346 1,213
Redeemable preferred stock - - - 17,250 17,250
Redeemable common stock 2,000 2,000 2,000 2,000 2,000
Common stock and accumulated deficit 4,368 21,731 45,411 38,760 23,193
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Beginning with 1994, the Company changed from a fiscal year end to a
calendar year end. Previously, the Company operated on a 52-53 week fiscal
year ending on the Saturday nearest to December 31. References below to
1993 and 1992 relate to fiscal years ended January 1, 1994 and January 2,
1993, respectively.
Results of Operations
Background. Historically, the Company's revenues have resulted
primarily from (i) payments received from the sale of research services
pursuant to collaborative agreements, (ii) fees generated from the
licensing of its technology and marketing rights to its products and (iii)
product related revenues on sales of its OncoScint product since 1992 in
Western Europe and since January 1993 in the U.S. Beginning February 1992,
the sales of research services by the Company included revenues from
CytoRad for the development of certain cancer imaging and radiotherapy
products licensed by the Company to CytoRad. During 1994, because of a
contractual dispute between the Company and CytoRad, no contract revenues
were recorded by the Company for research services performed on behalf of
CytoRad, although the Company continued with the development of the
products licensed to CytoRad. On November 15, 1994, the Company and
CytoRad entered into an agreement for the acquisition of CytoRad by the
Company. On February 23, 1995, the Company's shareholders approved the
issuance of the Company's securities necessary to effect the acquisition of
CytoRad and on February 27, 1995, the Company completed its acquisition of
CytoRad by merging CytoRad with and into a wholly-owned subsidiary of the
Company. As a result of the merger, the Company will not recognize any
further contract revenues from CytoRad and $11.7 million of CytoRad's cash
and securities were transferred to the Company. In addition, the Company
estimates that it will record in the first quarter of 1995 approximately
$20 million for acquired research and development on its statement of
operations, representing the amount by which the purchase price exceeds
CytoRad's net book value. This estimated charge to the statement of
operations may change based upon the Company's final accounting for this
transaction.
On December 20, 1994, the Company entered into a license agreement
with DuPont Merck pursuant to which DuPont Merck will have responsibility
for manufacturing and co-marketing Samarium EDTMP in the U.S., if and when
approved for marketing by FDA. Pursuant to the DP/Merck Agreement, the
Company received from DuPont Merck an up-front cash payment of $1,000,000
in December 1994 and additional payments in 1995. See Note 2 to the
Consolidated Financial Statements.
Beginning July 1, 1994, as a result of the change in the Company's
relationship with Knoll, product related revenues have included product
sales by the Company to its U.S. customers. See Note 4 to the Consolidated
Financial Statements. Since that date, the Company has not recorded any
product sales to Knoll or any co-promotion revenues. In addition, on
December 30, 1994, the Company entered into a Disengagement Agreement with
Chiron to reacquire the exclusive marketing and distribution rights in
Europe previously granted to Chiron. This reacquisition was consummated on
February 16, 1995. See Note 9 to the Consolidated Financial Statements.
Currently, the Company's focus is to provide the highest level of
support for those products which are the most advanced. The Company's
highest priority products are: (i) OncoScint CR/OV; (ii) Samarium EDTMP,
which is in late Phase III clinical development with an NDA submission to
FDA anticipated in the first half of 1995; and (iii) ProstaScint, for which
a PLA was submitted to FDA in January 1995. The Company is continuing to
evaluate, invest in and support the sales and marketing activities with
respect to OncoScint CR/OV. In addition, the Company has assigned high
priority to the product development and commercialization programs for
Samarium EDTMP and ProstaScint. The Company's strategic plan also supports
continued commitment to its antibody "linker" technology through
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ongoing product development efforts for cancer therapeutic agents. The
Company expects to expand its current product portfolio through in-
licensing products and technologies. Finally, the Company has committed
additional resources to its TSARs\SynGenes program.
Revenues. Total revenues were $2.5 million in 1994, $10.4 million in
1993 and $13.4 million in 1992. Product related revenues from sales of
OncoScint CR/OV were $1.4 million in 1994 and included domestic sales of
$1.2 million, Western European sales of $162,000 and a $109,000 reduction
for returns of OncoScint CR/OV inventory because of shelf life expiration.
In 1993, product related revenues were $1.6 million, including domestic
sales of $1.4 million and Western European sales of $164,000. In 1992,
product related revenues from the sales of OncoScint Colorectal in Europe
were $367,000.
To date, sales of OncoScint CR/OV in both the U.S. and European
markets have been limited, even though the product has technically
performed as predicted in clinical applications. OncoScint CR/OV is a very
technical product that requires a high degree of proficiency in nuclear
imaging, as well as a thorough appreciation of the information the scan can
provide. Cytogen believes that sales of OncoScint CR/OV may be increased
through approval of repeat administration, which is currently pending with
FDA, implementation of better quality control at the time the image is
actually acquired and through greater assistance with the interpretation of
the scans. The Company is exploring advances in teleradiology in order to
improve the acquisition and interpretation of an OncoScint CR/OV scan.
In the past, the Company relied in large part on third parties to
market its product. In 1994, the Company decided to reacquire the
marketing rights to OncoScint CR/OV from its U.S. and European
distributors, Knoll and Chiron, respectively. In anticipation of the
execution of the Termination Agreement with Knoll, as of May 20, 1994,
Knoll ceased its selling efforts and the Company resumed responsibility for
the U.S. marketing of OncoScint CR/OV. Beginning July 1, 1994, product
related revenues included direct product sales of $854,000 by the Company
to its U.S customers. The Company is considering, with respect to the
marketing of OncoScint CR/OV in the U.S., maintaining its direct selling
efforts, as well as co-promotion arrangements or licensing of all rights to
a third party. The Company intends to secure alternative marketing and
distribution partners for OncoScint CR/OV in Europe and Japan. There can
be no assurances that these efforts will be successful or that product
related revenues will increase markedly.
License and contract revenues for 1994, 1993 and 1992 included
milestone payments of $1.0 million, $2.0 million, and $5.0 million,
respectively. In 1994, the Company received a $1.0 million milestone
payment from DuPont Merck upon its entering into an agreement with the
Company to manufacture and co-market Samarium EDTMP in the U.S. See Note 2
to the Consolidated Financial Statements. In 1993, the Company received a
milestone payment of $2.0 million from CytoRad as a one-time licensing fee
for rights to the Company's ovarian cancer radiotherapy product and related
technology. In 1992, the Company received $3.0 million from CytoRad as a
one-time licensing fee for rights to prostate and bladder products
utilizing the Company's technology and $2.0 million from Knoll upon the
Company's receipt of FDA marketing approval for OncoScint CR/OV. Revenues
from the sale of research services were $47,000 in 1994 compared to $6.8
million in 1993 and $8.0 million in 1992. The decrease in 1994 is
attributable primarily to the absence of contract revenues from CytoRad.
Due to the uncertainty of the CytoRad business relationship, the Company
did not recognize any contract revenues for research services performed on
behalf of CytoRad. In 1994, the Company recorded an aggregate of $47,000
of contract revenues from Bracco and Chiron. In 1993, the Company recorded
$5.9 million of contract revenues from CytoRad in addition to the licensing
fee from CytoRad and $900,000 from Bracco. In 1992, the Company recorded
$6.1 million of contract revenues from CytoRad in addition to the licensing
fee from CytoRad and an aggregate of $1.9 million from Bracco, Sterling
Drug Inc. and Chiron.
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Operating Expenses. Total operating expenses were $34.8 million in
1994, $41.3 million in 1993 and $29.8 million in 1992. The decrease from
1993 to 1994 reflects the Company's objective to control spending and to
focus its efforts on its highest priorities: marketing and sales of
OncoScint CR/OV; phase III clinical development of Samarium EDTMP, a cancer
therapy agent for bone pain; submission in January 1995 of the PLA with FDA
for ProstaScint, a diagnostic agent for prostate cancer; development of
TSARs\SynGenes; and continuation of the prostate and ovarian cancer therapy
programs. The increase of $11.5 million from 1992 to 1993 is largely
attributable to selling and promotional activities associated with the U.S.
product launch effort of OncoScint CR/OV which commenced in the first
quarter of 1993, a reserve established in 1993 for potential inventory
writedowns of commercial inventory relating to OncoScint CR/OV, and
expenses associated with the settlement of a class action securities
lawsuit.
Research and development expenses were $20.3 million in 1994, $24.8
million in 1993 and $21.7 million in 1992. These expenses principally
reflect product development efforts and support for various ongoing
clinical trials. Human clinical trials in 1994 included development of
Samarium EDTMP and development on behalf of CytoRad of products for
diagnosis and treatment of prostate cancer. During 1994 and 1993, the
Company charged $1.1 million and $2.3 million, respectively, to research
and development expenses for potential inventory writedowns of commercial
inventory relating to OncoScint CR/OV. In July 1993, the Company
petitioned FDA for shelf-life extension for certain commercial raw material
inventory. The timing and outcome of FDA's response to this request is
uncertain. Given the quantities of commercial raw material inventory along
with the uncertainty of FDA's response regarding shelf-life extension for
this inventory, future inventory writedowns may be required.
Selling and marketing expenses were $5.5 million in 1994, $9.4 million
in 1993 and $2.7 million in 1992. The decrease from 1993 to 1994 and
increase from 1992 to 1993 are primarily attributable to the $5.1 million
recorded in 1993 for promotional expenses associated with the domestic
launch of OncoScint CR/OV as compared to $1.5 million recorded in 1994.
Reacquisition of technology and marketing rights expenses were $4.6
million in 1994 and included $2.4 million and $800,000 of one-time charges
for the reacquisition of marketing rights to OncoScint CR/OV from Knoll and
Chiron, respectively. In addition, the Company charged $1.4 million of
legal and investment banking fees relating to the CytoRad merger to expense
in 1994.
General and administrative expenses were $4.3 million in 1994, $7.0
million in 1993 and $5.4 million in 1992. General and administrative
expenses in 1993 were greater than 1992 and 1994 largely due to a reserve
established in 1993 for the settlement of a class action securities lawsuit
(see Note 18 to the Consolidated Financial Statements) and to higher levels
of general legal and corporate communication expenses.
Net Gain/Loss on Investments. Net loss on investments for 1994 was
$470,000 compared to net gains of $1.7 million and $3.4 million recorded in
1993 and 1992, respectively. The decrease in 1994 is attributable
primarily to a $1.5 million loss associated with the sale of government
securities due to the rise of interest rates. This loss was partially
offset by interest income of approximately $1.0 million in 1994. The net
gain on investments decreased in 1993 from 1992 by $1.7 million due to the
decline of average cash and short term investment balances in 1993.
Net Loss. Net losses were $32.8 million, $29.2 million and $12.9
million in 1994, 1993 and 1992, respectively. Losses per share were $1.38,
$1.38 and $0.75 in 1994, 1993 and 1992, respectively, on 23.8 million, 21.1
million and 19.0 million average shares outstanding in each year,
respectively. The losses per share for 1992 included a $0.07 dividend on
preferred stock. There were no dividends on preferred stock in 1993 and
1994 because on September 29, 1992, the Company called for redemption
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of all of its outstanding Convertible Exchangeable Preferred Stock. At
December 31, 1994, the Company had 2.1 million options outstanding under
its various stock option plans with exercise prices ranging from $1.00 to
$17.00 per share, and outstanding warrants to purchase 4.3 million shares
with exercise prices ranging from $12.50 to $24.15 per share. The loss per
share calculation stated above does not take into account the shares
issuable upon exercise of such options and warrants as their effect is
antidilutive.
Liquidity and Capital Resources
The Company's cash and short term investments as of December 31, 1994
were $7.7 million, compared to $23.8 million on January 1, 1994.
Historically, the Company's primary sources of cash have been proceeds from
the sales of its stock through public offerings and private placements, the
sale of research services, fees paid under its license agreements, product
related revenues, and interest earned on its cash and short term
investments. In January 1994, the Company sold an aggregate of 2 million
shares of its common stock to several European institutions, realizing net
proceeds of $9.1 million. In May and August of 1994, the Company sold to
Fletcher Capital Markets, Inc. an aggregate of 1.4 million shares of common
stock realizing net proceeds of $5.3 million. See Note 12 to the
Consolidated Financial Statements. In 1994, cash used for operating
activities of $27.6 million increased from the same period in 1993 by
approximately $12.2 million due primarily to (i) the receipt of a $2.0
million milestone payment from Knoll in January 1993, (ii) the receipt of
$8.3 million in payments (excluding $3.6 million of proceeds from warrants)
from CytoRad in 1993 and (iii) the $3.2 million non-cash charge to
operations in 1994 for the reacquisition of marketing rights. Cash used
for purchases of property and equipment in 1994 was $2.8 million compared
to $1.6 million in 1993 as a result of a project the Company began in 1993
and completed in 1994 to create additional manufacturing capacity for
monoclonal antibodies.
The Company has recorded product related revenues from the sales of
its OncoScint Colorectal product in Europe since 1992 and from sales of
OncoScint CR/OV in the United States since January 1993. To date, sales
have not been significant and are not expected to become a significant
source of cash flow in 1995. In anticipation of the execution of the
Termination Agreement (described below), as of May 20, 1994, Knoll ceased
its selling efforts and since that date, the Company's direct sales force
has been the sole marketer in the U.S. of OncoScint CR/OV. Beginning July
1, 1994, product related revenues have included direct product sales by the
Company to its U.S. customers. Since that date, the Company had not
recorded any product sales to Knoll or any co-promotion revenues. The
Company is considering, with respect to the marketing of OncoScint CR/OV in
the U.S., maintaining its direct selling efforts as well as co-promotion
arrangements or licensing of all rights to a third party. Depending on the
approach selected, significant resources could be required for such action.
On November 1, 1994, the Company executed the Termination Agreement
with Knoll terminating the Knoll Agreement. Pursuant to the Termination
Agreement, the Company has reacquired from Knoll all of the U.S. Rights to
OncoScint CR/OV. The Termination Agreement requires the Company to pay to
Knoll, over a four-year period and without interest, $3.0 million to
reacquire the U.S. Rights and reschedules payment of approximately $5.0
million of liabilities previously incurred under the terms of the Knoll
Agreement, as follows: $3,100,000 in 1995, $1,600,000 in 1996, $1,600,000
in 1997 and $1,700,000 in 1998. See Note 4 to the Consolidated Financial
Statements.
On December 30, 1994, the Company entered into the Disengagement
Agreement with Chiron to reacquire the European Rights and purchase certain
business assets relating to the European Rights, including existing
approvals by the appropriate regulatory authorities to market OncoScint
CR/OV in 12 countries in Europe. This reacquisition was consummated on
February 16, 1995. See Note 9 to the Consolidated Financial Statements.
The reacquisition price of $1 million, payable over three years and without
interest, will be paid as follows: $200,000 in 1995, $300,000 in 1996 and
$500,000 in 1997.
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Payment is secured by a mortgage covering approximately 11 acres of
undeveloped real property owned by the Company and located in Ewing, New
Jersey. This obligation is non-recourse to the Company.
During 1994, no payments were received by the Company from CytoRad and
the Company did not record any contract revenues from CytoRad. On November
15, 1994, the Company and CytoRad entered into an agreement for the
acquisition of CytoRad by Cytogen. On February 23, 1995, the Company's
shareholders approved the issuance of the Company's securities necessary to
effect the acquisition of CytoRad and on February 27, 1995, the Company
completed its acquisition of CytoRad by merging CytoRad with and into a
wholly-owned subsidiary of the Company. As a result of the merger, the
Company will not recognize any further contract revenues from CytoRad and
$11.7 million of CytoRad's cash and securities were transferred to the
Company, of which approximately $2.0 million will be used in 1995 to pay
for the merger transaction costs incurred by the Company. See Note 3 to
the Consolidated Financial Statements.
In 1993, the Company acquired an exclusive license in the U.S. from
Dow for Samarium EDTMP. See Note 5 to the Consolidated Financial
Statements. Samarium EDTMP is a cancer therapy agent that is being
developed by Cytogen as a treatment for the pain associated with bone
metastases, a condition that occurs when cancer originates in or spreads to
the bone. The first of two Phase III studies for Samarium has been
completed and the second Phase III study is currently ongoing. Based on a
pre-NDA meeting with FDA held in November 1994 and subsequent discussions
with representatives from the agency, the Company expects to file its NDA
in the first half of 1995. Within 30 days after the filing of the NDA, the
Company is required to pay to Dow $1,000,000. In addition, the Company
will be required to pay to Dow $4,000,000 if and when Samarium EDTMP
receives FDA approval. The agreement provides for additional payments by
the Company upon achievement of certain milestones and royalties on net
sales of the product once commercialized, including guaranteed minimum
payments.
In December 1994, Cytogen entered into a license agreement with DuPont
Merck. Pursuant to the terms of the DP/Merck Agreement, Cytogen received
from DuPont Merck an up-front cash payment of $1,000,000 in December 1994,
$4,000,000 in January 1995 for the sale to DuPont Merck of 908,265 shares
of Cytogen common stock and $1,334,000 in January 1995 to fund additional
clinical programs to expand the use and marketing of Samarium EDTMP. The
DP/Merck Agreement further provides for future payments of up to $2,916,000
toward additional clinical programs, a $2,000,000 milestone payment if and
when Samarium EDTMP receives FDA approval and royalty payments based on
sales, including guaranteed minimum payments.
In September 1989, the Company entered into an agreement with Bracco.
Pursuant to the terms of the Bracco Agreement, in 1989, Bracco purchased
250,000 shares of the Company's common stock (the "Shares") at $8.00 per
share. The Bracco Agreement provides that if the results of a feasibility
study conducted by the Company do not meet certain predetermined evaluation
criteria, the Company would be obligated to repurchase the Shares from
Bracco for an aggregate purchase price of $2,000,000. The Bracco Agreement
further established a completion date for the feasibility study of
September 29, 1993. The feasibility study was not completed by that date.
A final report on the findings of the feasibility study, which held that
the evaluation criteria had not been met, was released on March 4, 1994.
On July 11, 1994, Bracco notified the Company of its belief that the
Company has an obligation to redeem the Shares. The Company has entered
into negotiations with Bracco to reach an agreement as to the disposition
of the Shares and such negotiations are continuing. There can be no
assurances that these negotiations will be successful.
The Company intends to pursue opportunities to acquire, in-license and
develop other technologies or products to supplement its core products and
technology. If successful, this strategy may increase short
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term expenses or increase long term revenues. While there can be no
assurance that these efforts will be successful, any transaction is likely
to require payments by the Company in either cash or stock in addition to
the costs associated with developing and marketing any product or
technology.
The Company's operating and capital requirements, as described above,
may further change depending upon several factors, including: (i) the
amount of resources which the Company devotes to clinical evaluations and
the establishment of manufacturing, marketing and sales capabilities; (ii)
results of preclinical testing, clinical trials and research and
development activities; (iii) competitive and technological developments;
(iv) the Company's success in entering into, and cash flows derived from,
new technology licensing, marketing and research agreements, and product
related revenues; and (v) the Company's success in attracting additional
capital.
The Company plans to further control spending in 1995 and anticipates
that its existing cash and short term investments balance of $7.7 million
at December 31, 1994, together with payments received from DuPont Merck in
the first quarter of 1995 and funds received as a result of the CytoRad
merger, will be sufficient to satisfy its currently anticipated cash needs
through 1995. The Company anticipates receiving additional funds from
DuPont Merck in accordance with the terms of the DP/Merck Agreement, other
license and contract revenues, product related revenues, interest income,
and from the sales of equity securities as market conditions permit. There
can be no assurance as to the Company's success in obtaining such
additional funds or that such funds, if obtained, will be sufficient to
meet the Company's cash requirements through the time that product related
resources are sufficient to cover the Company's operating expenses.
Item 8. Financial Statements and Supplementary Data
The response to Item 8 is submitted as a separate section of this Form
10-K.
Item 9. Changes in and Disagreements with Accountants Accounting and
Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the Company's Directors is incorporated by
reference to the information contained under the captions "Nominees for
Directors" and "Principal Stockholders" in the Company's Proxy Statement.
One of the Company's Directors, George Ebright, is not included in the
Proxy Statement because he has advised the Company of his decision not to
stand for re-election at the Company's 1995 Annual Meeting of Stockholders.
Information regarding Mr. Ebright is set forth below. Information
regarding the Company's Executive Officers is set forth in Part I of this
Form 10-K and incorporated by reference to the information contained under
the caption "Principal Stockholders" in the Company's Proxy Statement.
George W. Ebright, 57, has been a director of the Company since
February 1989. Mr. Ebright served as the Company's Chairman of the Board
from February 1990 until January 1995, the Company's Chief Executive
Officer from February 1989 until January 1994 and as the Company's
President from February 1989 to August 1991. Prior to joining the Company,
Mr. Ebright was President and Chief Operating Officer and a member of the
Board of Directors of SmithKline Beckman Corporation, a health care and
life sciences company engaged in the marketing of a broad line of
prescription and proprietary products for human and animal health care, as
well as diagnostic and analytical products and services. Mr. Ebright began
working for SmithKline & French Laboratories in 1963, and through 1987 held
several senior management positions with that company and two of its
divisions. Mr. Ebright was a member of the Board of Directors of Household
International Corporation from July 1983 to February 1989, was a member of
the Board of Directors of the Health Industry Manufacturers Association and
was a member of the Board of Directors of the Industrial Biotechnology
Association. Mr. Ebright currently serves as a director of Univax
Biologics, Inc., a biopharmaceutical company which develops products for
the prevention and treatment of infectious diseases; The West Company, a
supplier of specialized packaging systems to the health care and consumer
products industries; and Arrow International, Inc., a company that
develops, manufactures and markets a broad range of clinically advanced,
disposable catheters and related products. He holds a B.A. degree in
Economics from Franklin & Marshall College, and an M.B.A. degree from the
University of Delaware.
Item 11. Executive Compensation
Incorporated by reference to the information contained under the
caption "Executive Compensation" in the Company's Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to the information contained under the
caption "Principal Stockholders" in the Company's Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to the information contained under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions" in the Company's Proxy Statement.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as a part of the Report:
(1) and (2)
The response to this portion of Item 14 is submitted as a separate section
of this Form 10-K.
(3) Exhibits -- Each management contract or compensatory plan or
--------
arrangement required to be filed as an exhibit hereto pursuant to
Item 14(c) of this report is listed in Exhibit Nos. 10.12.1, 10.12.2,
10.12.3, 10.13.1, 10.13.2, 10.33, 10.35 and 10.38 below.
Exhibit No.
-----------
2 - Agreement and Plan of Merger, dated November 15, 1994
among the registrant, CytoRad Acquisition Corp., a
wholly-owned subsidiary of the registrant, and
CytoRad Incorporated./19/
3.1 - Restated Certificate of Incorporation, as
amended./17/
3.2 - By-Laws of Cytogen Corporation, as amended./17/
4.1 - Specimen of Common Stock Certificate./6/
4.2 - Specimen of Warrant Certificate to purchase Cytogen
Corporation Common Stock, issued to stockholders of
CytoRad Incorporated./14/
4.3 - Specimen of Unit Certificate./14/
4.4 - Form of Warrant Agreement, including form of warrant,
exercisable through January 31, 1997, to purchase 1.0
share of Cytogen Corporation Common Stock at $8.00
per share./17/
4.5 - Form of Contingent Value Rights Agreement, including
form of Contingent Value Right to receive a fraction
(not to exceed one-half) of a share of Cytogen
Corporation Common Stock./17/
10.1 - Standard Form of Confidentiality Agreement (as
executed by all officers and employees)./2/
10.2 - Form of Scientific Advisory Board Agreement between
Cytogen Corporation and the members thereof./1/
10.3.1 - Agreement effective as of June 2, 1983 between
American Cyanamid Company and Cytogen
Corporation./1/
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<PAGE>
10.3.2 - First Amendment dated January 29, 1985 to License
Agreement between American Cyanamid Company and
Cytogen Corporation./1/
10.4.1 - License Agreement dated June 3, 1985 between
Institute National de la Sante et de la Recherche
Medicale and Cytogen Corporation./1/
10.4.2 - License Agreement dated April 18, 1988 between
Institute National de la Sante et de la Recherche
Medicale and Cytogen Corporation./3/
10.4.3 - License Agreement dated April 19, 1988 between
Institute National de la Sante et de la Recherche
Medicale and Cytogen Corporation as Licensor and
Clonatec as Licensee./3/
10.5.1 - License Agreement dated September 24, 1985 between
Farmitalia Carlo Erba S.p.A. and Cytogen
Corporation./1/
10.5.2 - First Amendment dated February 20, 1987 between
Farmitalia Carlo Erba S.p.A. and Cytogen Corporation
to License Agreement between Farmitalia Carlo Erba
S.p.A. and Cytogen Corporation./8/
10.5.3 - Second Amendment dated March 31, 1989 between
Farmitalia Carlo Erba S.r.l. and Cytogen Corporation
to License Agreement between Farmitalia Carlo Erba
S.p.A. and Cytogen Corporation./9/
10.6 - Amended and Restated Agreement dated April 7, 1989
between Sterling Drug Inc. and Cytogen Corporation to
License Agreement between Eastman Kodak Company and
Cytogen Corporation./9/
10.7.1 - Non-Exclusive License Agreement dated April 24, 1989
between Eli Lilly and Company and Cytogen
Corporation./9/
10.7.2 - Non-Exclusive License Agreement dated April 24, 1989
between Eli Lilly and Company S.A. and Cytogen
Corporation./9/
10.7.3 - Stock Purchase Agreement, dated as of August 22,
1989, between Eli Lilly and Company and Cytogen
Corporation./7/
10.8.1 - Research and Option Agreement dated September 28,
1989 between Bracco Industria Chimica S.p.A. and
Cytogen Corporation./9/
10.8.2 - Amendment to the Research and Option Agreement, dated
February 4, 1992, between Bracco Industria Chimica
S.p.A. and Cytogen Corporation./14*/
10.9.1 - Production and Supply Agreement, dated September 29,
1989, between Cytogen Corporation and Celltech
Limited./12/
10.9.2 - Amendment No. 1 to the Production and Supply
Agreement, dated September 15, 1991, between Cytogen
Corporation and Celltech Limited./14*/
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<PAGE>
10.9.3 - Agreement, dated November 7, 1991, between Cytogen
Corporation and Celltech Limited (the "Celltech
Agreement")./14*/
10.9.4 - Amendment No. 3 to the Production and Supply
Agreement, dated January 9, 1992, between Cytogen
Corporation and Celltech Limited./16*/
10.9.5 - Amendment No. 4 to the Production and Supply
Agreement, dated January 9, 1992, between Cytogen
Corporation and Celltech Limited./16*/
10.9.6 - Amendment No. 5 to the Production and Supply
Agreement, dated March 10, 1992, between Cytogen
Corporation and Celltech Limited./16*/
10.9.7 - Amendment No. 1 to the Celltech Agreement, dated March
9, 1992, between Cytogen Corporation and Celltech
Limited./16*/
10.10.1 - Equipment Lease Agreement dated as of June 28, 1988,
between MNC Leasing Corporation and Cytogen
Corporation./3/
10.10.2 - Equipment Lease Agreement Assignment to General
Electric Capital Corporation, dated December 20,
1990, from MNC Leasing Corporation./11/
10.11.1 - Lease Agreement, dated as of March 16, 1987, by and
between Peregrine Investment Partners I, as lessor,
and Cytogen Corporation, as lessee./2/
10.11.2 - Amendment, dated as of October 16, 1987, to Lease
Agreement between Peregrine Investment Partners I and
Cytogen Corporation./5/
10.11.3 - Lease Agreement, dated November 14, 1989 between
College Road Associates, Limited Partnership and
Cytogen Corporation./12/
10.11.4 - Lease Agreement, dated as of February 20, 1986,
between College Road Associates and Cytogen
Corporation, as amended on June 27, 1986./10/
10.11.5 - Lease Agreement, dated as of December 23, 1981, by
and between The Trustees of Princeton University and
Cytogen Corporation, as amended on March 27,
1986./10/
10.11.6 - Lease Agreement, dated as of November 26, 1991,
between College Road Associates, Limited Partnership
and Cytogen Corporation./14/
10.12.1 - 1989 Employee Stock Option Plan./5/
10.12.2 - Cytogen Corporation Standard Form Employee Executive
Officer Incentive Stock Option Agreement./11/
10.12.3 - Cytogen Corporation Standard Form Employee Executive
Officer Non-Qualified Stock Option Agreement./11/
-30-
<PAGE>
10.13.1 - 1988 Stock Option Plan for Non-Employee Directors./5/
10.13.2 - Cytogen Corporation Standard Form Non-Employee
Director Non-Qualified Stock Option Agreement./11/
10.13.3 - Cytogen Corporation Standard Form 1992 Employee Non-
Qualified Stock Option Agreement./16/
10.14 - Standard Form of Indemnification Agreement entered
into between Cytogen Corporation and its officers,
directors, and consultants./7/
10.15 - 1989 Stock Option Policy for Outside Consultants./7/
10.16 - Agreement, dated July 31, 1991, between Cytogen
Corporation and Johnson Matthey./14*/
10.17.1 - Research and Development Agreement, dated February
13, 1992, between Cytogen Corporation and CytoRad
Incorporated./14/
10.17.2 - Amended and Restated Research and Development
Agreement, dated January 3, 1993 between Cytogen
Corporation and CytoRad Incorporated./16/
10.18.1 - Technology License Agreement, dated February 13,
1992, between Cytogen Corporation and CytoRad
Incorporated./14/
10.18.2 - Amended and Restated Technology License Agreement,
dated as of January 3, 1993./16/
10.19 - Stock Purchase Option Agreement, dated February 13,
1992, among Cytogen Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Shearson Lehman
Brothers, and certain other parties as
underwriters./14/
10.20 - Services Agreement, dated February 13, 1992, between
Cytogen Corporation and CytoRad Incorporated./14/
10.21.1 - License Option Agreement, dated February 13, 1992,
between Cytogen Corporation and CytoRad
Incorporated./14/
10.21.2 - Amended and Restated License Option Agreement, dated
as of January 3, 1993, between Cytogen Corporation
and CytoRad Incorporated./16/
10.22 - Administrative Agreement, dated February 13, 1992,
between Cytogen Corporation and CytoRad
Incorporated./14/
10.23 - Class A Note issued by CytoRad Incorporated to
Cytogen Corporation./14/
-31-
<PAGE>
10.24 - Agreement, dated as of December 31, 1992, by and
among Cytogen Corporation, Unilever N.V., Unilever
PLC, Unilever UK Central Resources Ltd. and Unipath
Ltd./16*/
10.25 - License Agreement dated as of March 31, 1993 between
Cytogen Corporation and The Dow Chemical
Company./15*/
10.26 - Investment Agreement dated as of February 24, 1994
between Cytogen Corporation and Fletcher Capital
Markets, Inc./20/
10.27 - Amended and Restated Investment Agreement, dated as
of May 6, 1994, between Cytogen Corporation and
Fletcher Capital Markets, Inc./18/
10.28 - License Agreement by and between Cytogen Corporation
and The DuPont Merck Pharmaceutical Company./17*/
10.29 - Agreement to Terminate License, Supply and Marketing
Agreement, dated as of November 1, 1994, between
Cytogen Corporation and Knoll Pharmaceutical
Company./17/
10.30 - Order Fulfillment Agreement, dated as of November 1,
1994, between Cytogen Corporation and Knoll
Pharmaceutical Company./17/
10.31 - Letter Agreement, dated November 1, 1994, between
Cytogen Corporation and Knoll Pharmaceutical
Company./17/
10.32 - Disengagement Agreement, dated December 30, 1994,
between Cytogen Corporation and Chiron B.V./17*/
10.33 - Separation Agreement, dated March 15, 1994, between
Cytogen Corporation and William J. Ryan./17/
10.34 - 1992 Cytogen Corporation Employee Stock Option Plan
II, as amended./17/
10.35 - Stock Compensation and Performance Option Agreement,
dated December 8, 1994, between Cytogen Corporation
and Dr. Thomas J. McKearn./17/
10.36 - License Agreement, dated March 10, 1993, between
Cytogen Corporation and The University of North
Carolina at Chapel Hill, as amended.**
10.37 - Option and License Agreement, dated July 1, 1993,
between Cytogen Corporation and Sloan-Kettering
Institute for Cancer Research.**
10.38 - Description of Arrangement with Somerset Central
Corporation.
-32-
<PAGE>
21 - Subsidiaries of Cytogen Corporation.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule (submitted to SEC only in
electronic format).
______________________
/1/ Filed as an exhibit to Form S-l Registration Statement (No. 35-
5533) and incorporated herein by reference.
/2/ Filed as an exhibit to Form 10-K Annual Report for Year Ended
January 2, 1988 and incorporated herein by reference.
/3/ Filed as an exhibit to Form 10-K Annual Report for Year Ended
December 31, 1988 and incorporated herein by reference.
/4/ Filed as an exhibit to Form 10-K Annual Report for Year Ended
December 30, 1989 and incorporated herein by reference.
/5/ Filed as an exhibit to Form S-8 Registration Statement (No. 33-
30595) and incorporated herein by reference.
/6/ Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (No. 33-5533) and incorporated herein by reference.
/7/ Filed as an exhibit to Amendment No. 1 to Form S-1 Registration
Statement (No. 33-31280) and incorporated herein by reference.
/8/ Filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-1
Registration Statement (No. 33-31280) and incorporated herein by
reference.
/9/ Filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (No. 33-31280) and incorporated herein by
reference.
/10/ Filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-1
Registration Statement (No. 33-35430) and incorporated herein by
reference.
/11/ Filed as an exhibit to Form 10-K Annual Report for the Year Ended
December 29, 1990 and incorporated herein by reference.
/12/ Filed as an exhibit to Amendment No. 1 to Form 10-K Annual Report
for the Year Ended December 29, 1990 and incorporated herein by
reference.
/13/ Filed as an exhibit to Form S-3 Registration Statement (No. 33-
40219) and incorporated herein by reference.
-33-
<PAGE>
/14/ Filed as an exhibit to Form 10-K Annual Report for the Year Ended
December 28, 1991 and incorporated herein by reference.
/15/ Filed as an exhibit to Form 10-Q/A-1 Amendment to Quarterly Report
for the quarter ended July 3, 1993 and incorporated herein by
reference.
/16/ Filed as an exhibit to Form 10-K Annual Report for the Year Ended
January 2, 1993 and incorporated herein by reference.
/17/ Filed as an exhibit to Form S-4 Registration Statement (No. 33-
88612) and incorporated herein by reference.
/18/ Filed as an exhibit to Form 10-Q Quarterly Report for the quarter
ended March 31, 1994, as amended, and incorporated herein by reference.
/19/ Filed as an exhibit to Form 8-K dated November 15, 1994 and
incorporated herein by reference.
/20/ Filed as an exhibit to Form 10-K Annual Report for the Year Ended
January 1, 1994 and incorporated herein by reference.
/*/ Cytogen Corporation has received confidential treatment of certain
provisions contained in this exhibit pursuant to an order issued by the
Securities and Exchange Commission. The copy filed as an exhibit omits
the information subject to the confidentiality grant.
/**/ Cytogen Corporation has requested confidential treatment of certain
provisions contained in this exhibit. The copy filed as an exhibit
omits the information subject to the confidentiality request.
(b) Reports on Form 8-K:
The Company filed one Report on Form 8-K during the fourth quarter
of 1994 reporting on "Item 5. Other Events" with respect to a press
release announcing that the Company and CytoRad Incorporated had
signed a definitive agreement for the acquisition of CytoRad by the
Company. The date of the Report was November 15, 1994.
(c) Exhibits:
The Exhibits filed with this Form 10-K are listed above in response
to Item 14(a)(3).
(d) Financial Statement Schedules:
The response to this portion of Item 14 is submitted as a separate
section of this Form 10-K.
-34-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on the
17th day of March, 1995.
CYTOGEN CORPORATION
By: /s/ Thomas J. McKearn
------------------------------------
Thomas J. McKearn
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas J. McKearn and T. Jerome Madison or
either of them, his attorney-in-fact, each with the power of substitution,
for him in any and all capacities, to sign any amendments to this Annual
Report, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that either of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ William C. Mills III Chairman of the Board of Directors March 17, 1995
- - ---------------------------
William C. Mills III
/s/ Thomas J. McKearn President, Chief Executive Officer March 17, 1995
- - --------------------------- and Director (Principal Executive
Thomas J. McKearn Officer)
/s/ T. Jerome Madison Vice President, Chief Financial March 17, 1995
- - --------------------------- Officer, Secretary and Director
T. Jerome Madison (Principal Financial and
Accounting Officer)
/s/ George W. Ebright Director March 17, 1995
- - ---------------------------
George W. Ebright
/s/ Robert F. Johnston Director March 17, 1995
- - ---------------------------
Robert F. Johnston
/s/ Charles E. Austin Director March 17, 1995
- - ---------------------------
Charles E. Austin
/s/ Bruce R. Ross Director March 17, 1995
- - ---------------------------
Bruce R. Ross
-35-
<PAGE>
Annual Report on Form 10-K
Fiscal Year Ended December 31, 1994
Item 8, Item 14(a)(1) and (2) and Item 14(d)
CYTOGEN CORPORATION
Princeton, New Jersey
-36-
<PAGE>
Form 10-K Item 14(a)(1) and (2) and Item 14(d)
CYTOGEN CORPORATION AND SUBSIDIARY
LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL
STATEMENT SCHEDULES
(1) Consolidated Financial Statements
---------------------------------
The following consolidated financial statements of Cytogen Corporation
and Subsidiary together with the related notes and report of Arthur
Andersen LLP, independent public accountants, are included in Item 8:
Page in
Form 10-K
---------
Report of Independent Public Accountants........................... 38
Consolidated Balance Sheets as of December 31, 1994 and January
1, 1994........................................................... 39
Consolidated Statements of Operations--Years Ended December 31,
1994, January 1, 1994
and January 2, 1993........................................... 40
Consolidated Statements of Redeemable Common Stock, Preferred
Stock, Common Stock and Accumulated Deficit--Years Ended
December 31, 1994, January 1, 1994, and January 2, 1993........... 41
Consolidated Statements of Cash Flows--Years Ended December 31,
1994, January 1, 1994 and January 2, 1993......................... 42
Notes to Consolidated Financial Statements......................... 43
(2) Consolidated Financial Statement Schedules
------------------------------------------
The following consolidated financial statement schedules of Cytogen
Corporation and Subsidiary are included in Item 14(d):
Schedule II--Amounts Receivable from Related Parties,
Underwriters, Promoters and Employees Other Than Related
Parties........................................................... 55
Schedule VIII--Valuation and Qualifying Accounts................... 56
Schedules other than those listed are omitted for the reasons that they
are not required, are not applicable or that equivalent information has
been included in the consolidated financial statements and notes thereto or
elsewhere in the Form 10-K.
-37-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CYTOGEN CORPORATION:
We have audited the accompanying consolidated balance sheets of CYTOGEN
Corporation (a Delaware Corporation) and Subsidiary as of December 31, 1994
and January 1, 1994, and the related consolidated statements of operations,
redeemable common stock, preferred stock, common stock and accumulated
deficit and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CYTOGEN
Corporation and Subsidiary as of December 31, 1994 and January 1, 1994 and
the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index
of financial statements are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not a required part of
the basic financial statements. These schedules have been subjected to the
auditing procedures applied in our audits of the basic financial statements
and, in our opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
February 27, 1995
-38-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(all amounts in thousands, except share data)
<TABLE>
<CAPTION>
1994 1993
---------------------
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 7,700 $ 4,074
Short term investments - 19,690
Accounts receivable, net of allowance for doubtful accounts
of $526 in 1994 and 1993 294 223
Receivable from CytoRad Incorporated 810 748
Inventories 3,159 4,088
Other current assets 437 675
---------------------
Total current assets 12,400 29,498
---------------------
Property and Equipment:
Leasehold improvements 9,005 7,376
Equipment and furniture 5,923 4,717
---------------------
14,928 12,093
Less- Accumulated depreciation and amortization (9,377) (8,368)
---------------------
Net property and equipment 5,551 3,725
---------------------
Other Assets 1,739 1,412
---------------------
$ 19,690 $ 34,635
=====================
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable and accrued liabilities $ 6,371 $ 10,712
Current portion of long term liabilities 2,641 -
---------------------
Total current liabilities 9,012 10,712
---------------------
Long Term Liabilities 4,310 192
---------------------
Commitments and Contingencies
Redeemable Common Stock, 250,000 shares issued and
outstanding, at redemption value 2,000 2,000
---------------------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares
authorized - none issued - -
Common stock, $.01 par value, 69,600,000 shares authorized,
24,658,000 and 21,047,000 shares issued and outstanding
in 1994 and 1993, respectively 247 211
Additional paid-in capital 159,941 144,534
Accumulated deficit (155,820) (123,014)
---------------------
Total stockholders' equity 4,368 21,731
---------------------
$ 19,690 $ 34,635
=====================
</TABLE>
The accompanying notes are an integral part of these statements.
-39-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(all amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Revenues:
Product related $ 1,411 $ 1,591 $ 367
License and contract 1,047 8,763 13,000
---------------------------------
Total Revenues 2,458 10,354 13,367
---------------------------------
Operating Expenses:
Research and development 20,321 24,844 21,680
Selling and marketing 5,536 9,399 2,679
Reacquisition of technology and marketing rights 4,647 - -
General and administrative 4,290 7,016 5,394
---------------------------------
Total Operating Expenses 34,794 41,259 29,753
---------------------------------
Loss from Operations $ (32,336) $ (30,905) $ (16,386)
Gain (Loss) on Investments, net (470) 1,676 3,447
---------------------------------
Net Loss (32,806) (29,229) (12,939)
Dividends on Preferred Stock - - (1,293)
---------------------------------
Net Loss to Common Stockholders $ (32,806) $ (29,229) $ (14,232)
=================================
Net Loss per Common Share $ (1.38) $ (1.38) $ (0.75)
=================================
Weighted Average Common Shares
Outstanding 23,822 21,121 18,994
=================================
</TABLE>
The accompanying notes are an integral part of these statements.
-40-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK, PREFERRED
STOCK, COMMON STOCK AND ACCUMULATED DEFICIT
(All amounts in thousands, except share data)
<TABLE>
<CAPTION>
Redeemable Additional
Common Preferred Common Paid-in Accumulated
Stock Stock Stock Capital Deficit
=======================================================
<S> <C> <C> <C> <C> <C>
Balance, December 28, 1991 $ 2,000 $ 17,250 $ 181 $ 119,425 $ (80,846)
Issued 2,444,000 shares of common
stock upon conversion and redemption
of preferred stock - (17,250) 25 17,184 -
Granted 2,000 shares of common stock - - - 25 -
Issued 188,400 shares of common
stock upon exercise of stock options - - 2 901 -
Proceeds from warrants issued in
connection with CytoRad
Incorporated - 1992 portion - - - 2,746 -
Dividends on preferred stock - - - (1,293) -
Net loss - - - - (12,939)
-------------------------------------------------------
Balance, January 2, 1993 2,000 - 208 138,988 (93,785)
Granted 500 shares of common stock - - - 2 -
Issued 287,120 shares of common
stock upon exercise of stock options - - 3 1,401 -
Proceeds from warrants issued in
connection with CytoRad
Incorporated - 1993 portion - - - 3,636 -
Issued warrants to purchase 260,000
shares of common stock in
connection with acquired technology - - - 507 -
Net loss - - - - (29,229)
-------------------------------------------------------
Balance, January 1, 1994 2,000 - 211 144,534 (123,014)
Issued 3,400,000 shares of common
stock - - 34 14,374 -
Issued 197,942 shares of common
stock per settlement of lawsuit - - 2 998 -
Granted 10,000 shares of common
stock - - - 27 -
Issued 2,680 shares of common
stock upon exercise of stock
options - - - 8 -
Net loss - - - - (32,806)
-------------------------------------------------------
Balance, December 31, 1994 $ 2,000 $ - $ 247 $ 159,941 $ (155,820)
=======================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-41-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (32,806) $ (29,229) $ (12,939)
-----------------------------------
Adjustments to Reconcile Net Loss to Cash
Used for Operating Activities:
Reacquisition of Marketing Rights 3,220 - -
Depreciation and Amortization 1,009 1,297 1,690
Imputed Interest 328 - -
Idle Equipment - 215 -
Inventory Writedown 1,074 2,346 -
Writedown of Land - 600 -
Warrants Issued to Acquire Technology - 507 -
Stock Grants 62 7 25
Amortization of Deferred Charges (110) (84) (177)
Changes in Assets and Liabilities:
Accounts receivable, net (71) 2,531 (1,330)
Receivable from CytoRad Incorporated (62) 480 (666)
Inventories (145) (998) (3,768)
Other current assets 238 1,328 (250)
Other assets (327) 1 (29)
Accounts payable and accrued liabilities 667 5,620 (8)
Other liabilities (722) - -
-----------------------------------
Total adjustments 5,161 13,850 (4,513)
-----------------------------------
Net cash used for operating activities (27,645) (15,379) (17,452)
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in Short Term Investments 19,690 13,171 12,689
Purchases of Property and Equipment (2,835) (1,555) (3,370)
-----------------------------------
Net cash provided by investing activities 16,855 11,616 9,319
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 14,416 1,403 903
Proceeds from Warrants Issued in Connection
with CytoRad Incorporated - 3,557 2,411
Proceeds from Sales-Leaseback Refinancing - - 1,093
Repayment of Long Term Debt - - (588)
Redemption of Preferred Stock - - (41)
Dividends Paid on Preferred Stock - - (1,724)
-----------------------------------
Net cash provided by financing activities 14,416 4,960 2,054
-----------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 3,626 1,197 (6,079)
Cash and Cash Equivalents, Beginning of Year 4,074 2,877 8,956
-----------------------------------
Cash and Cash Equivalents, End of Year $ 7,700 $ 4,074 $ 2,877
===================================
</TABLE>
The accompanying notes are an integral part of these statements.
-42-
<PAGE>
CYTOGEN CORPORATION AND SUDSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
CYTOGEN Corporation ("Cytogen" or the "Company") is a biopharmaceutical
company engaged in the discovery, development and marketing of products for
the targeted delivery of diagnostic and therapeutic substances directly to
sites of disease. In January 1995, the Company filed a Product License
Application ("PLA") with the U.S. Food and Drug Administration ("FDA") for
ProstaScint, a prostate cancer diagnostic imaging product. On December 29,
1992, the Company received final regulatory approval for the sale of its
OncoScint colorectal and ovarian cancer imaging products ("OncoScint
CR/OV") in the United States. In 1991, the Company received approval for
the sale of its OncoScint colorectal cancer imaging product in Europe. In
order to develop, manufacture and market its products effectively, the
Company will require additional financing. The Company is subject to those
risks of companies in similar stages of development.
Basis of Consolidation
The consolidated financial statements include the accounts of Cytogen and
its wholly-owned subsidiary, which was formed in October 1994.
Fiscal Year
Beginning in 1994, the Company changed from a fiscal year end to a
calendar year end. Previously, the Company operated on a 52-53 week fiscal
year ending on the Saturday nearest to December 31. References to 1993 and
1992 relate to fiscal years ended January 1, 1994 and January 2, 1993,
respectively.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and all
highly-liquid investments with a maturity of three months or less at the
time of purchase.
Short Term Investments
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS
No. 115"), effective January 2, 1994. As permitted by FAS No. 115, the
Company did not retroactively restate prior years' financial statements.
Short term investments as of January 1, 1994 were stated at cost, which
approximated market value, and consisted primarily of U.S. Treasury
obligations, government agency paper and corporate medium term notes.
Realized loss on the sale of securities was $1,549,000 in 1994.
-43-
<PAGE>
CYTOGEN CORPORATION AND SUDSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Inventory
The Company's inventory is primarily related to OncoScint CR/OV, its
monoclonal antibody-based imaging agent for the diagnosis of colorectal and
ovarian cancers. Inventory is stated at the lower of cost or market using
the first-in, first-out method and consisted of:
<TABLE>
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Raw Materials $ 2,771,000 $ 3,904,000
Work in Process 49,000 36,000
Finished Goods 339,000 148,000
----------- -----------
$ 3,159,000 $ 4,088,000
=========== ===========
</TABLE>
Inventory shown as of December 31, 1994 is net of a $1,543,000 reserve.
The Company's raw materials include an investment in monoclonal antibodies
for commercial use, which the Company currently estimates will not be fully
used in the foreseeable future. In July 1993, the Company petitioned FDA
for an extension of the shelf life of monoclonal antibodies. As of
December 31, 1994, approximately $2.0 million of raw materials exceeded the
currently authorized FDA shelf life. The realization of the Company's
investment in raw material inventory is dependent upon the following: (i)
the growth in product sales which, to date, has been slower than
anticipated; and (ii) the timing and outcome of FDA's response to the
Company's request for shelf life extension. Given the above uncertainties
with respect to raw materials inventory, future inventory writedowns may be
required.
Property and Depreciation
Furniture and equipment are stated at cost net of depreciation and a
$215,000 reserve for idle equipment. Leasehold improvements are amortized
on a straight-line basis over the lease period or the estimated useful
life, whichever is shorter. Equipment and furniture are depreciated on a
straight-line basis over five years. Expenditures for repairs and
maintenance are expensed as incurred. For 1994, 1993 and 1992, repairs
and maintenance expenses were $382,000, $310,000 and $312,000,
respectively.
Other Assets
Other assets consist of undeveloped real property with a net book value
of $1,284,000, which is valued at the lower of cost or market (see Note 9).
Revenue Recognition
Product related revenues include (i) product sales by the Company to its
customers and its former U.S. and European distributors, Knoll
Pharmaceuticals Company ("Knoll") and Chiron B.V., formerly EuroCetus B.V.,
successor in interest to EuroCetus International, N.V. ("Chiron"),
respectively, (ii) co-promotion revenues, which resulted from the sale of
commercial product by Knoll to its customers, and (iii) royalty payments on
product sales by Chiron to its customers. Product sales are recognized
upon shipment of finished goods. Co-promotion revenues were recognized
upon the shipment by Knoll of product to its customers. Royalty revenues
were recognized when Chiron shipped product to its customers. Beginning on
July 1, 1994, as a result of the Company's termination of its relationship
with Knoll (see Note 4), product related revenues include direct product
sales by the Company to its U.S.
-44-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
customers in the amount of $854,000. Since that date, the Company has not
recorded any product sales to Knoll or any co-promotion revenues. See Note
9 for discussion of the change in the Company's relationship with Chiron.
License and contract revenues include milestone payments and fees under
collaborative agreements with third parties, the sale of research services
and materials, and revenues from other miscellaneous sources. Revenues
from milestone payments are recognized when all parties concur that the
events stipulated in the agreement have been achieved. Revenues from cost-
plus contracts are recognized when the costs are incurred.
Research and Development
Research and development expenditures consist of projects conducted by
the Company and payments made to sponsored research programs and
consultants. All research and development costs are expensed as incurred.
Research and development expenditures for customer sponsored programs were
$29,000, $9,112,000 and $8,868,000 in 1994, 1993, and 1992, respectively.
Patent Costs
Patent costs are expensed as incurred.
Loss Per Share
Net loss per common share is based upon the weighted average common
shares outstanding during each period. Common stock equivalents and other
potentially dilutive securities are not included as their effect is
antidilutive. Dividends on preferred stock which were equivalent to $0.07
per common share in 1992 are added to the net loss for the purpose of
computing net loss per common share.
Reclassification
Certain reclassifications have been reflected in the 1992 and 1993
financial statements to conform with the 1994 presentation.
Supplemental Schedule of Noncash Financing Activity
In 1994, the Company issued 197,942 shares of common stock in settlement
of a lawsuit (see Note 18).
2. DUPONT MERCK:
On December 20, 1994, the Company entered into a license agreement (the
"DP/Merck Agreement") with DuPont Merck. Under the terms of the DP/Merck
Agreement, the Company granted to DuPont Merck a license to the Company's
rights to Samarium EDTMP pursuant to which DuPont Merck will have
responsibility for manufacturing and co-marketing Samarium EDTMP in the
U.S., if and when approved for marketing by FDA. Samarium EDTMP is a
cancer therapy agent that is being developed by the Company as a treatment
for the pain associated with bone metastases, a condition that occurs when
-45-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
cancer originates in or spreads to the bone. The Company acquired the U.S.
rights to Samarium EDTMP from The Dow Chemical Company ("Dow") pursuant to
a license agreement in March 1993 and assumed responsibility for the
development and commercialization of the product at that time (see Note 5).
Samarium EDTMP is currently in late Phase III clinical development.
Pursuant to the terms of the DP/Merck Agreement, the Company received
from DuPont Merck an up-front cash payment of $1,000,000 in December 1994,
$4,000,000 in January 1995 for the sale to DuPont Merck of 908,265 shares
of the Company's common stock and $1,334,000 in January 1995 to fund
additional clinical programs to expand the use and marketing of Samarium
EDTMP. The DP/Merck Agreement further provides for future payments of up
to $2,916,000 toward additional clinical programs, a $2,000,000 milestone
payment if and when Samarium EDTMP receives FDA approval and royalty
payments based on sales, including guaranteed minimum payments.
3. CYTORAD INCORPORATED:
In a public offering by the Company and CytoRad Incorporated ("CytoRad")
completed in March 1992, 4,025,000 units were sold, each unit consisting of
one share of the callable common stock of CytoRad and one warrant to
purchase one share of the common stock of the Company at $24.15 per share.
The aggregate price to the public of the units was $40.3 million. All of
the approximately $37.4 million in net proceeds of the offering were paid
to CytoRad, which was obligated to pay the Company substantially all such
net proceeds subject to certain conditions. The Company elected to
amortize the $11.1 million value of the warrants, sold as part of the units
transaction, and recorded the amortized warrant value as additional paid-in
capital over the life of its development agreement with CytoRad in
proportion to the amount of gross revenues received by the Company from
CytoRad each year. During 1994, the Company did not record any contract
revenues from CytoRad and, therefore, no amortized warrant value was
recorded. In 1993 and 1992, $3,636,000 and $2,746,000 of amortized warrant
value was recorded, respectively. As a result of the consummation of the
merger described below, there will be no further accounting for the
remaining warrant value.
In February 1992, the Company entered into a series of arrangements with
CytoRad, which included a technology license agreement which provided for
an up-front $3.0 million one-time payment by CytoRad as partial payment for
a license of the prostate and bladder products utilizing the Company's
technology, a development agreement under which the Company was to use
funds aggregating approximately $34.9 million by 1996 which were to be
provided by CytoRad to conduct research and development of products for the
diagnosis and treatment of prostate and bladder cancers, a license option
agreement which allowed the Company to acquire licenses from CytoRad to
commercialize the products developed under the development agreement and a
services agreement which provided for the Company to furnish certain
administrative services to CytoRad on a fully burdened cost reimbursement
basis. These arrangements were modified in February 1993 to provide for a
license from the Company to CytoRad of its ovarian cancer radiotherapy
product and related technology in return for an up-front, non-refundable
license fee payment to the Company of $2.0 million which was recorded in
the first quarter of 1993.
In March 1994, the Company was informed that CytoRad was exploring
modifications to its then existing business relationship with the Company.
Accordingly, CytoRad's Board of Directors did not approve the 1994
development agreement budget. Due to the uncertainty of the CytoRad
business
-46-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
relationship, the Company did not recognize any contract revenues for
services performed on behalf of CytoRad in 1994. In 1993 and 1992,
$5,903,000 and $6,064,000 of contract revenues were recognized,
respectively, net of amortization of warrants issued.
On November 15, 1994, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with CytoRad to purchase all of CytoRad's
outstanding units. Pursuant to the Merger Agreement, on January 20, 1995,
the Company commenced an exchange offer to exchange for each CytoRad unit
(a) 1.5 shares of the Company's common stock, (b) a warrant to acquire one
share of the Company's common stock for $8.00 that expires January 31, 1997
and (c) a contingent value right ("CVR") to receive, under certain
circumstances and at no additional cost, up to one-half share of the
Company's common stock. The CVR will be triggered in the event that the
aggregate trading price of 1.5 shares of the Company's common stock and the
new warrant averages less than $12.00 during the 45 consecutive trading
days ending January 31, 1997. However, the CVR will expire and have no
value if the aggregate trading price for such securities averages $12.00 or
more during any 45 consecutive trading days prior to January 31, 1997.
On February 23, 1995, the Company's shareholders approved the issuance of
the Company's securities necessary to effect the acquisition of CytoRad.
On February 24, 1995, the Company announced that it had completed the
exchange offer, pursuant to which approximately 93% of the outstanding
CytoRad units were validly tendered. On February 27, 1995, the Company
issued 5,622,698 shares of common stock, 3,748,468 CVRs and 3,748,468
warrants pursuant to the exchange offer. In addition, the Company
announced on February 27, 1995 that it had completed its acquisition of
CytoRad by merging CytoRad with and into a wholly-owned subsidiary of the
Company. Holders of CytoRad common stock who did not tender their CytoRad
units in the exchange offer became entitled to receive as a result of the
merger one and one-half shares of the Company's common stock and one CVR
for each share of CytoRad common stock owned thereby. Although the 276,532
previously issued Cytogen warrants forming a part of CytoRad units not
tendered in the exchange offer will remain outstanding after the merger,
the Company has agreed that such warrants will be exercisable at $8.00 per
warrant share pursuant to the terms of the Merger Agreement. As a result
of the merger, the Company reacquired the product rights to the prostate,
ovarian and bladder products it had previously licensed to CytoRad. In
addition, the Company will not recognize any further contract revenues from
CytoRad and $11.7 million of CytoRad's cash and securities were transferred
to the Company. The Company estimates that it will record in the first
quarter of 1995 approximately $20 million for acquired research and
development on its statement of operations, representing the amount by
which the purchase price exceeds CytoRad's net book value. This estimated
charge to the statement of operations may change based upon the Company's
final accounting for this transaction.
4. KNOLL PHARMACEUTICAL COMPANY:
The Company and Knoll entered into a license, supply and marketing
agreement in December 1991 (the "Knoll Agreement") for the co-promotion of
OncoScint CR/OV in the United States. The agreement provided for revenues
from milestone payments to the Company, the last of which was received in
1992, revenues from product sales from the supply of commercial product by
the Company to Knoll, co-promotion revenues from the sale of commercial
product by Knoll to its customers, and reimbursement to the Company of
certain product development expenses. The Company also agreed to share
with Knoll certain sales promotion expenses which were to be paid by the
Company from earned co-promotion
-47-
<PAGE>
revenues. In 1994 and 1993, the Company incurred $412,000 and $5,100,000,
respectively, in co-promotion expenses and recognized $430,000 and
$977,000, respectively, in co-promotion revenues.
On November 1, 1994, the Company executed a termination agreement with
Knoll (the "Termination Agreement"). Pursuant to the Termination
Agreement, the Company has reacquired from Knoll all U.S. marketing rights
(the "U.S. Rights") to OncoScint CR/OV. The Termination Agreement requires
the Company to pay to Knoll, over a four-year period and without interest,
$3.0 million to reacquire the U.S. Rights and reschedules the payment of
approximately $5.0 million of liabilities previously incurred under the
terms of the Knoll Agreement, as follows: $3,100,000 in 1995, $1,600,000
in 1996, $1,600,000 in 1997 and $1,700,000 in 1998. In 1994, the Company
recorded a non-recurring charge of $2.4 million for the reacquisition of
the U.S. Rights. Imputed interest of $328,000 relating to the obligation,
which was discounted for accounting purposes at 10%, was also recorded in
1994.
In anticipation of the execution of the Termination Agreement, as of May
20, 1994, Knoll ceased its selling efforts, and since that date, the
Company's direct sales force has been the sole marketer in the U.S. of
OncoScint CR/OV, which is approved by FDA for the imaging of colorectal and
ovarian cancer. The Company is considering, with respect to the marketing
of OncoScint CR/OV in the U.S., maintaining its direct selling efforts as
well as co-promotion arrangements or licensing of all rights to a third
party.
Under the terms of an Order Fulfillment Agreement effective November 1,
1994, Knoll will continue to provide warehousing, shipping, invoicing and
collection services for the Company until June 30, 1995. As of December
31, 1994, Knoll owes the Company $722,000 for outstanding receivables, net
of distribution fees. This amount was reflected as a reduction of the
Company's liability due to Knoll inasmuch as the right of offset exists.
5. THE DOW CHEMICAL COMPANY:
In 1993, the Company acquired an exclusive license in the U.S. from Dow
for Samarium EDTMP and related technology. In connection with this
acquisition, the Company issued to Dow warrants to purchase 260,000 shares
of the Company's common stock at $12.50 per share. The Company valued the
warrants at $507,000 and recorded this amount as a charge to research and
development expense. The agreement also provides for certain payments by
the Company to Dow upon the achievement of certain milestones in the
regulatory approval process and to pay royalties on net sales of the
product.
6. REVENUES FROM MAJOR CUSTOMERS:
Customers who contributed 10% or more of the Company's total product
related, license and contract revenues were as follows:
<TABLE>
<CAPTION>
Customer 1994 1993 1992
-------- ------ ------ ------
<S> <C> <C> <C>
DuPont Merck (Note 2) 41% -% -%
Knoll (Note 4) 16 14 15
Bracco Industria Chimica S.p.A. (Note 10) 2 8 10
CytoRad (Note 3) - 76 68
</TABLE>
-48-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
1994 1993
---------- ------------
<S> <C> <C>
Research contracts and materials $2,694,000 $ 2,578,000
Accounts payable 1,572,000 149,000
Professional and legal 468,000 2,130,000
Payroll 278,000 166,000
Knoll - 4,124,000
Other accruals 1,359,000 1,565,000
---------- ------------
$6,371,000 $ 10,712,000
========== ============
</TABLE>
8. LINE-OF-CREDIT:
At December 31, 1994, the Company had an unused secured line-of-credit of
$3,000,000 expiring in July 1996. Interest rates on any borrowings under
the line-of-credit will vary depending on the amounts borrowed. The Company
did not have any borrowings outstanding under the line-of-credit in 1994.
The line-of-credit is collaterized by certain cash equivalents.
<TABLE>
<CAPTION>
9. LONG TERM LIABILITIES:
1994
----------
<S> <C>
Due to Knoll, net of $722,000 receivable (Note 4) $6,157,000
Due to Chiron, net of $125,000 receivable 712,000
Deferred charges 82,000
----------
6,951,000
Less: Current portion 2,641,000
----------
$4,310,000
==========
</TABLE>
On December 30, 1994, the Company entered into a disengagement agreement
(the "Disengagement Agreement") with Chiron. Pursuant to a Distribution
and License Agreement dated as of October 21, 1989 and as amended on May
18, 1992, the Company granted to Chiron exclusive marketing and
distribution rights in Europe (the "European Rights") to OncoScint CR/OV,
under which contract and product related revenues of $162,000, $164,000 and
$377,000 were recognized in 1994, 1993, and 1992, respectively. Under the
Disengagement Agreement, the Company reacquired the European Rights and
purchased certain business assets relating to the European Rights,
including existing approvals by the appropriate regulatory authorities to
market OncoScint CR/OV in 12 countries in Europe. This reacquisition was
consummated on February 16, 1995. The reacquisition price of $1 million,
payable over three years and without interest, will be paid as follows:
$200,000 in 1995, $300,000 in 1996 and $500,000 in 1997. The liability was
discounted at 10% for accounting purposes. Payment is secured by a
mortgage covering approximately 11 acres of undeveloped real property owned
by the Company in Ewing, New Jersey. This obligation is non-recourse to
the Company. The Company had a receivable
-49-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
of approximately $125,000 due from Chiron at December 31, 1994, which will
be offset against the amount due Chiron under the Disengagement Agreement.
This receivable is reflected as a reduction of the amount due Chiron in the
accompanying balance sheet. As a result of the reacquisition of the
European Rights, the Company recorded a non-recurring charge of $800,000
in the fourth quarter of 1994. The Company intends to secure alternative
marketing and distribution partners for OncoScint CR/OV in Europe and
Japan. Until the earlier of (i) an agreement with a new distributor, or to
(ii) December 31, 1995, Chiron will continue to provide warehousing and
distribution services to the Company.
10. REDEEMABLE COMMON STOCK:
In 1989, the Company entered into an agreement (the "Bracco Agreement")
with Bracco Industria Chimica S.p.A. ("Bracco") granting Bracco an
exclusive option to license magnetic resonance imaging enhancement agents
using the Company's linking technology. Pursuant to the terms of the
Bracco Agreement, in 1989, Bracco purchased 250,000 shares of the Company's
common stock (the "Shares") at $8.00 per share. The Bracco Agreement
provides that if the results of a feasibility study conducted by the
Company do not meet certain predetermined evaluation criteria, the Company
would be obligated to repurchase the Shares from Bracco for an aggregate
purchase price of $2,000,000. The Bracco Agreement further established a
completion date for the feasibility study of September 29, 1993. The
feasibility study was not completed by that date. A final report on the
findings of the feasibility study, which held that the evaluation criteria
had not been met, was released on March 4, 1994.
On July 11, 1994, Bracco notified the Company of its belief that the
Company has an obligation to redeem the Shares. The Company has entered
into negotiations with Bracco to reach an agreement as to the disposition
of the Shares and such negotiations are continuing. There can be no
assurances that these negotiations will be successful.
Under the Bracco Agreement, contract revenues of $41,000, $860,000 and
$1,343,000 were recognized in 1994, 1993, and 1992, respectively.
11. REDEEMABLE PREFERRED STOCK:
In 1989 and 1990, 690,000 shares of the Company's $2.50 Convertible
Exchangeable Preferred Stock (the "Convertible Preferred Stock") were sold
for $25.00 per share, realizing net proceeds of $15,680,000. Each share of
the Convertible Preferred Stock was entitled to cumulative dividends of
$2.50 per share per year, was convertible into 3.55 shares of common stock
at the option of the holder, and was redeemable by the Company under
certain circumstances.
-50-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On September 29, 1992, the Company called for redemption of all of its
outstanding Convertible Preferred Stock at a price of $26.75 per share.
The Company established a redemption date of October 15, 1992. Prior to
the redemption date, an aggregate of 688,454 shares of Convertible
Preferred Stock were tendered for conversion into common stock. A total of
1,546 shares of Convertible Preferred Stock were redeemed on the redemption
date for $41,000. As a result of the conversion and redemption, none of
the shares of Convertible Preferred Stock remains outstanding.
12. COMMON STOCK:
In January 1994, the Company sold an aggregate of 2 million shares of
common stock to several European institutions, realizing net proceeds of
$9.1 million.
On May 6, 1994, the Company and Fletcher Capital Markets, Inc.
("Fletcher") entered into a revised investment agreement under which
Fletcher (i) purchased 500,000 shares of the Company's common stock at a
price of $3.50 per share totalling $1.7 million, (ii) purchased an
additional 900,000 shares of the Company's common stock in August 1994 at
$4.00 per share totalling $3.6 million and (iii) received an option
exercisable until August 12, 1995 to purchase an amount of the Company's
common stock which, together with the shares previously purchased, will
represent up to 9.9% of the Company's outstanding common stock on the date
of exercise of the option. The exercise price of the option will be 95% of
the average daily closing prices during the 60 trading days prior to the
date Fletcher elects to exercise its option. The shares involved in this
transaction were registered pursuant to a registration statement on Form S-
3 filed with the Securities and Exchange Commission on April 6, 1994, as
amended. Fletcher has since assigned its rights under the option to
Harvard Management Company, Inc.
See Notes 2, 3 and 18 for information related to the Company's issuance
of common stock in connection with the DP/Merck Agreement, CytoRad merger
and settlement of shareholders litigation, respectively. See Note 10 for
discussion of redeemable common stock.
13. STOCK OPTIONS AND GRANTS:
The Company has various stock option plans which provide for the
issuance of incentive and non-qualified stock options to employees, non-
employee directors and outside consultants, for which an aggregate of
4,070,500 shares of common stock have been reserved. The persons to whom
options may be granted and the number, type, and terms of the options vary
among the plans. Options are granted with an exercise term of 10 years and
generally become exercisable in installments over periods of up to 5 years
at an exercise price determined either by the plan or equal to the fair
market value of the common stock at the date of grant. Under certain
circumstances, vesting may accelerate. In September 1993, the Company
offered new options to non-executive employees in exchange for existing
options,
-51-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
both vested and non-vested, at an exercise price equal to the fair market
value of the common stock on the date of the restructuring. Activity under
these plans was as follows:
<TABLE>
<CAPTION>
Number of Price Range
Shares Per Share
=====================================================================
<S> <C> <C>
Balance at December 28, 1991 1,564,520 $ 1.00 - 17.00
Granted 489,900 14.75 - 20.00
Exercised (188,400) 1.00 - 16.13
Cancelled (61,480) 5.44 - 17.00
---------------------------------------------------------------------
Balance at January 2, 1993 1,804,540 $ 1.00 - 20.00
Granted 887,900 5.63 - 19.88
Exercised (287,120) 1.00 - 15.69
Cancelled (718,010) 3.18 - 20.00
---------------------------------------------------------------------
Balance at January 1, 1994 1,687,310 $ 1.00 - 17.00
Granted 778,080 2.44 - 6.19
Exercised (2,680) 1.00 - 3.88
Cancelled (334,770) 3.88 - 17.00
Balance at December 31, 1994 2,127,940 $ 1.00 - 17.00
=====================================================================
</TABLE>
At December 31, 1994, 637,400 shares were exercisable and 1,214,195
shares were available for issuance of additional options that may be
granted under the plans.
In 1994, 1993 and 1992, respectively, 10,000, 500 and 2,000 shares of
common stock were granted to an officer of the Company and to members of
the Company's Scientific Advisory Board. The expense related to these
commitments to grant shares of stock is based upon the fair value of those
shares on the date of the commitment and is recognized over the period
beginning with such commitment and ending with the actual grant.
14. RELATED PARTY TRANSACTIONS:
Consulting services are provided under agreements with companies owned
by an officer of the Company and one of the Company's principal
stockholders, both of whom are members of the Board of Directors. The
annual fees under the agreements were $180,000, $61,900 and $25,000 in
1994, 1993 and 1992, respectively.
-52-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The seven members of the Company's Scientific Advisory Board were
stockholders and provided consulting services to the Company in 1993 and
1992. Consulting fees, including fees including stock grants, paid to the
five non-employee members totaled $47,000 and $50,000 in 1993 and 1992,
respectively.
15. PENSION PLANS:
The Company maintains a defined contribution pension plan. The
contribution is determined by the Board of Directors each year and is based
upon a percentage of gross wages of eligible employees. The plan provides
for vesting over five years, with credit given for prior service. The
Company also makes contributions under a 401(k) plan in amounts which match
up to 50% of the salary deferred by the participants. Matching is capped at
6% of deferred salaries. Total pension expense was $256,000, $335,000 and
$331,000 for 1994, 1993 and 1992, respectively.
16. INCOME TAXES:
As of December 31, 1994, the Company had federal net operating loss
carryfowards of approximately $100 million. The Company also had federal
and state research and development tax credit carryfowards of approximately
$4 million. The net operating loss and credits carryfowards will begin to
expire in 1995, if not utilized.
The Tax Reform Act of 1986 contains provisions that limit the
utilization of net operating loss and tax credit carryfowards if there has
been a "change of ownership". Such a "change of ownership" as described in
Section 382 of the Internal Revenue Code may limit the Company's
utilization of its net operating loss and tax credit carryfowards.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amount used for income tax purposes.
Based upon the Company's earnings history, a valuation allowance for
deferred tax assets is required to reduce the Company's net deferred tax
assets to the amount realizable at present (zero).
Significant components of the Company's deferred tax assets for federal
and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryfowards $ 34,000 $ 31,000
Nondeductible research and development related 16,000 10,000
expenses
Research and development credits 4,000 3,500
Reacquisition of technology and marketing rights 1,500 -
Other, net 1,000 1,500
-------- --------
Total deferred tax assets 56,500 46,000
Valuation allowance for deferred tax assets (56,500) (46,000)
-------- --------
Net deferred tax assets $ - $ -
-------- --------
</TABLE>
-53-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. COMMITMENTS AND CONTINGENCIES:
The Company leases its administrative and research facilities. Rent
expense incurred on these leases was $1,247,000, $1,301,000 and $1,519,000
in 1994, 1993 and 1992, respectively. Minimum future obligations under
these leases total $7,143,000 as of December 31, 1994 and will be paid as
follows: $1,099,000 in 1995, $1,293,000 in 1996, $1,057,000 in 1997,
$799,000 in 1998, $842,000 in 1999 and an aggregate of $2,053,000 in 2000
through 2003.
The Company has an agreement which provides for equipment lease
financings. As of December 31, 1994, the Company has $2,966,000 in sale-
leaseback refinancings of which approximately $1.2 million was outstanding
against this arrangement. The refinancings resulted in a deferred gain
which is being amortized over the lease term of 45 months. The sale-
leaseback refinancings are secured by $358,200 in standby letters of credit
provided under a letter of credit agreement. Minimum future obligations
under these and other non-cancelable leases totalled $608,100 at December
31, 1994 and will be incurred as follows: $413,400 in 1995, $181,500 in
1996 and $13,200 in 1997.
The Company is obligated to make minimum future payments under research
and development contracts which expire at various times. As of December
31, 1994, the minimum future payments under contracts with fixed terms
totalled $593,000 and will be paid as follows: $270,000 in 1995 and
$323,000 in 1996. Under contracts whose expirations are not fixed, the
annual minimum payments are $27,500 in future years. In addition, the
Company is obligated to pay royalties on revenues from commercial products
developed from the research, including certain guaranteed minimum payments.
18. LITIGATION:
In September 1992, a class action securities law suit was filed. On
November 18, 1994, final approval was given to the settlement of that law
suit, which provided for a $1,950,000 cash payment (which includes
approximately $900,000 of fees and expenses of plantiffs' counsel), the
issuance of 197,942 shares of the Company's common stock and an additional
$500,000 payable if the Company has annual earnings per share of $.50 or
greater during any fiscal year commencing with 1993 through 1996. The cost
of the settlement was recorded as a liability at January 1, 1994.
-54-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
SCHEDULE II
AMOUNTS RECEIVABLE FROM RELATED PARTIES
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
=======================================================================================================================
Column A Column B Column C Column D Column E
- - -----------------------------------------------------------------------------------------------------------------------
Balance at Deductions
------------------------
Beginning of Amounts Amounts Balance at End of Period
---------------------------
Name of Debtor Period Additions Collected Written Current Not Current
Off
- - ------------------------- -------------- ----------------- ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR
ENDED
DECEMBER 31, 1994:
Sterling Drug Inc./(1)/ $ 525,813 $ - $ - $ - $ 525,813 $ -
CytoRad Incorporated 748,163 61,430/(2)/ - - 809,593 -
FOR THE YEAR
ENDED
JANUARY 1, 1994:
Sterling Drug Inc. $ 525,813 $ - $ - $ - $ 525,813 $ -
CytoRad Incorporated 1,148,634 11,999,709/(3)/ 12,400,180 - 748,163 -
FOR THE YEAR
ENDED
JANUARY 2, 1993:
Sterling Drug Inc. $ 843,104 $ 583,333/(4)/ $ 900,624 $ - $ 525,813 $ -
CytoRad Incorporated 147,625 9,666,823/(3)/ 8,665,814 - 1,148,634 -
=======================================================================================================================
</TABLE>
/1/ Sterling Drug Inc., a subsidiary of Eastman Kodak Co., has been assigned
Kodak's rights under the agreement previously entered into with Kodak.
/2/ Represents disbursements made on behalf of CytoRad Incorporated.
/3/ Represents revenues from the development and services agreements, proceeds
from the warrants issued, and reimbursement for disbursements made on
behalf of CytoRad Incorporated.
/4/ Represents revenues from the license and technology agreement.
-55-
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARY
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- ---------- ---------- ---------- ----------
Additions
--------------------------------
Balance at
Beginning Charged to Costs Balance at
Description of Period and Expenses Other Accounts Deductions End of Period
----------- ---------- ---------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Allowances for doubtful
accounts receivable $526,000 $ - $ - $ - $ 526,000
Inventory reserves 688,000 1,074,000 - 219,000 1,543,000
FOR THE YEAR ENDED
JANUARY 1, 1994:
Allowances for doubtful
accounts receivable $263,000 $ 263,000 $ - $ - $ 526,000
Inventory reserves - 2,346,000 - 1,658,000 688,000
=========================================================================
</TABLE>
-56-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Sequentially
Number Description Numbered Page
------ ----------- -------------
10.36 License Agreement, dated March 10, 1993,
between Cytogen Corporation and The University
of North Carolina at Chapel Hill, as amended.**
10.37 Option and License Agreement, dated July 1,
1993, between Cytogen Corporation and Sloan-
Kettering Institute for Cancer Research.**
10.38 Description of arrangement with
Somerset Central Corporation
21 Subsidiaries of Cytogen
Corporation
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
(Submitted to SEC only in
electronic format)
** Cytogen Corporation has requested confidential treatment of certain
provisions contained in this exhibit. The copy filed as an exhibit
omits the information subject to the confidentiality request.
-57-
<PAGE>
[CONFIDENTIAL
TREATMENT
REQUESTED]
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (hereinafter "Agreement") is made and entered into this
10th day of March , 1993 (hereinafter "Effective Date")
between THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL, having an address at
300 Bynum Hall, Chapel Hill, N. C. (hereinafter "University") and CYTOGEN
CORPORATION, with offices at 600 College Road East-CN 5308, Princeton, New
Jersey 08540-5308 (hereinafter "Cytogen").
BACKGROUND
University has developed and is continuing to develop technology relating to
Totally Synthetic Affinity Reagents; file #ORS 86-8 (hereinafter "TSAR
Technology") .
University is the owner by assignment of certain patents and patent applications
covering said TSAR Technology.
University is presently engaged in and intends to continue to conduct research
and development to make improvements in its proprietary TSAR Technology .
The parties acknowledge and hereby confirm that they have entered into certain
agreements (hereinafter collectively, "Research
<PAGE>
Agreements") which are, on the Effective Date of this Agreement, subsisting and
in full force and effect.
The University acknowledges and hereby confirms that Cytogen has exercised its
right under the aforementioned Option Agreement to acquire an exclusive license
to commercialize the TSAR Technology developed in the laboratories of Dr. Dana
Fowlkes and Dr. Brian Kay at the University.
University is willing to grant such exclusive license to Cytogen under the terms
and conditions stated hereinbelow and to transfer to Cytogen all information and
technology concerning TSARs for the ultimate benefit of the public.
NOW THEREFORE, in consideration of the premises and the mutual covenants herein
recited, and other good and valuable considerations, the receipt of which is
acknowledged, it is agreed as follows:
1. Definitions
-----------
1.1 "Affiliate" shall mean any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common control
with Cytogen. For purposes of this sub-paragraph 1.1, control shall mean (a) in
the case of corporate entities, direct or indirect ownership of at least fifty
2
<PAGE>
percent (50%) of the stock or participating shares entitled to vote for the
election of directors; and (b) in the case of non-corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the equity interest with
the power to direct the management and policies of such entity.
1.2 "Cytogen Technology" shall mean all information and data pertaining to
products which were transferred to the University by Cytogen during the term of
this Agreement and pursuant to sponsored research agreements (hereinafter
"Research Agreements").
1.3 "Licensed Field" shall mean all purposes of Licensed Products including,
without limitation, therapeutic and diagnostic uses.
1.4 "Licensed Know-how" shall mean all data, information, technology or
special ability on the part of the University relating to the research,
development, manufacture or testing of TSAR Technology for use in the Licensed
Field and which are useful in seeking approval from appropriate governmental
health authorities to market Licensed Products, including animal, laboratory and
human clinical data, technical information, knowledge, techniques, processes,
systems, formulae, results of experimentation and records pertaining thereto in
which the University has any rights on the Effective Date or which shall be
subsequently acquired by the University during the term of this
3
<PAGE>
Agreement, but only to the extent such future information arises out of Cytogen-
sponsored research at the University.
1.5 "Licensed Patents" shall mean any and all applications for United States
Letters Patent which have been or which may be filed at any time covering TSAR
Technology, as well as any and all divisions, continuations, continuations-in-
part and renewals thereof, any and all United States Letters Patent which may be
granted thereon, any and all reissues and extensions thereof, and any and all
foreign counterpart applications and/or Letters Patent granted thereon.
Schedule A sets forth a list of the United States Letters Patent and
applications therefor and foreign patent applications in existence as of the
Effective Date of this Agreement.
1.6 "Licensed Products" shall mean and include any products for use in the
Licensed Field which, at the time of manufacture, use or sale, (i) are within
the scope of a Valid Licensed Claim of a Licensed Patent; or (ii) are produced,
processed or otherwise manufactured by any method and/or process within the
scope of a Valid Claim of a Licensed Patent; or (iii) whose use is within the
scope of a Valid Licensed Claim of a Licensed Patent; or (iv) which utilize or
are produced, processed or otherwise manufactured by any method and/or process
contained within any Licensed Know-how or University Confidential Technology.
4
<PAGE>
1.7 "Licensed Territory" shall mean the entire world.
1.8 "Net Sales" shall mean the amount billed by Cytogen, an Affiliate or
third party sublicensee from the sale for commercial use of Licensed Products to
independent third parties less [ Information omitted and filed separately
with the Commission under Rule 24b-2. ] In the event a Licensed Product is
sold in the form of a combination product containing one or more active
ingredients other than TSAR Technology, Net Sales for such combination products
shall be calculated by multiplying actual Net Sales of such Licensed Products by
the fraction A/(A+B) where A is the invoice price of the given Licensed Product
if sold separately by Cytogen, an Affiliate or third party sublicensee, and B is
the total invoice price of any other active component or components in the
combination if sold separately by Cytogen, an Affiliate or third party
sublicensee. If the given Licensed Product and the other active component or
components in the combination are not sold separately by Cytogen, an Affiliate
or third party sublicensee, Net Sales for purposes of determining royalties on
the combination shall be calculated by multiplying Net Sales of the combination
by the fraction C/(C+D) where C is Cytogen's, an Affiliate's or third party
sublicensee's total actual cost of Licensed Product at the point of formulation
into the combination product and D is Cytogen's, an Affiliate's or third party
sublicensee's total actual cost of the other active ingredient(s) at the point
of formulation
5
<PAGE>
included in the combination product.
1.9 "Research Agreements", as hereinabove indicated, shall mean all
Agreements, Amendments and Letter Agreements listed in Schedule B.
1.10 "TSAR Technology" shall mean and collectively include all inventions
relating to the TSAR Technology as developed in the laboratories of Dr. Dana
Fowlkes and Dr. Brian Kay at the University, which (a) were in existence on the
Effective Date of this Agreement or which are made at any time in accord with or
pursuant to the Research Agreements; and (b) which are legally and/or
beneficially owned, and/or controlled by University and/or which pursuant to
University's employment contract or policy covering University's scientific
staff are obligated to be assigned to University. TSAR Technology, based on or
resulting from data developed in the laboratories of Dr. Dana Fowlkes and Dr.
Brian Kay, shall also mean and collectively include the identification,
production, manufacture and/or utilization of (a) TSARs which includes any
proteins, polypeptides and/or peptides, having specific binding affinity for any
of a wide variety of ligands or portions thereof, said ligands, including but
not limited to a chemical group, an ion, a metal, a synthetic organic compound,
a bioorganic compound, an inorganic compound, a protein or peptide, a nucleic
acid, a carbohydrate, a lipid, a fatty acid, a viral particle, a membrane
vesicle, a cell wall component, or any portion
6
<PAGE>
of any of the above, identified by a process encompassing screening a library of
vectors expressing a plurality of semi-random or random oligonucleotide
sequences to identify those encoding a protein, polypeptide or peptide having
specificity for a ligand of choice; (b) nucleotide sequences encoding TSARs; (c)
vectors and/or libraries of vectors containing nucleotide sequences encoding
TSARs; and (d) transformed cells containing the vectors encoding TSARs. The
TSARs shall include both (a) unifunctional proteins, polypeptides and/or
peptides having a binding domain with affinity for a ligand; and (b)
heterofunctional proteins, polypeptides and/or peptides having a binding domain
with affinity for a ligand and one or more biologically or chemically active
effector domains, in which the binding domain and the effector domain can
optionally be joined by a linker domain which is either stable or susceptible to
cleavage.
1.11 "University Confidential Technology" shall mean and collectively include
all technical information pertaining to the TSAR Technology including all
research and development information, unpatented inventions, formulas, methods,
plans, processes, specifications, characteristics, equipment design, know-how,
experience and trade secrets to the extent that, as of the date of disclosure to
Cytogen, is not (a) known to Cytogen; (b) disclosed in the published literature;
(c) generally available to industry; or (d) obtained by Cytogen from a third
party without binder of secrecy, provided however, that such third party has no
-------- -------
7
<PAGE>
confidentiality obligations to University. All such information which is
characterized as University Confidential Technology shall cease to be
confidential, when, through no fault or omission of Cytogen, such information
becomes (a) disclosed in the published literature; or (b) generally available to
industry; or (c) obtained by Cytogen from a third party without binder of
secrecy, provided however, that such third party has no confidentiality
-------- -------
obligations to the University.
1.12 "Valid Licensed Claim" shall mean and include a claim in an issued
Licensed Patent which has not lapsed or become abandoned and which claim has not
been declared invalid by an unreversed or unappealable decision or judgment of a
court of competent jurisdiction.
2. License
-------
2.1 Grant University hereby grants Cytogen and its Affiliates an exclusive
-----
license to make, have made, use and sell Licensed Products in the Licensed Field
in the Licensed Territory under Licensed Patents, Licensed Know-how and
University Confidential Technology, with the right to sublicense third parties.
2.2 Contractual Warranty The University warrants and represents that it has
--------------------
full right and power to grant the license
8
<PAGE>
set forth in paragraph 2.1 hereinabove without burdens, encumbrances, restraints
or limitations of any kind which could adversely affect the rights of Cytogen,
and that there are no outstanding written or oral agreements, assignments or
encumbrances in existence inconsistent with the provisions of this Agreement.
3. Payments
--------
3.1 Royalties In part consideration of the licenses granted in paragraph
---------
2.1 hereinabove, Cytogen shall pay the University royalties as follows:
[ Information omitted and filed separately with the Commission under
Rule 24b-2.
9
<PAGE>
]
3.2 Milestone Payments In part consideration of the license granted under
------------------
paragraph 2.1 hereinabove, Cytogen shall make payments to the University in the
amounts and at the times
10
<PAGE>
indicated below:
[ Information omitted and filed separately with the Commission under
Rule 24b-2.
11
<PAGE>
]
3.3 Minimum Royalties In part consideration of the license granted under
-----------------
paragraph 2.1 hereinabove, Cytogen shall pay the University minimum royalties as
follows:
[ Information omitted and filed separately with the Commission under
Rule 24b-2.
12
<PAGE>
]
3.4 Force Majeure - Government Interference In the event Cytogen is unable
---------------------------------------
to make, have made, use or sell Licensed Products because it is prevented,
restricted or interfered with by reason of any cause beyond the control of
Cytogen, including but not limited to fire, strikes or labor disputes, or any
law, regulation or policy of the Federal or any State or local government or any
agency thereof, Cytogen, upon written notice to the University,
13
<PAGE>
shall be excused from making the payments provided for in paragraph 3 and from
adhering to commitments provided for in Paragraph 4, during the time of such
prevention, restriction or interference.
3.5 Mandatory Licenses In the event local laws or regulations in any
------------------
country of the Licensed Territory shall require University to enter into a
mandatory license, no royalties shall be due University from Cytogen in such
country of the Licensed Territory.
3.6 Credit Against Royalties [ Information omitted and filed
------------------------
separately with the Commission under Rule 24b-2.
]
3.7 Timing of Royalty Payments Commencing ninety (90) days after the end
--------------------------
of the first and each subsequent calendar quarter in which sales of a Licensed
Product are made, Cytogen, its Affiliates and third party sublicensees shall
deliver or cause to be delivered to the University a written report showing (a)
the sales of each Licensed Product during the preceding quarter and (b) the
calculation of Net Sales and the amount payable as royalties under paragraph 3.1
hereinabove. Concurrently with the submission of each such written report,
Cytogen shall pay or cause to be paid
14
<PAGE>
to the University the amount of royalties shown to be due thereon.
3.8 Royalty Payments Royalties shall be payable from the country in which
----------------
they are earned and subject to foreign exchange regulations then prevailing in
such country, paid at such place as University may, from time to time designate
and shall be payable to University. Unless otherwise agreed to by the parties
hereto, royalties shall be remitted in United States Dollars. When, and if, all
parties hereto agree that royalties shall be paid in a currency other than the
currency of the country in which the royalties are earned, such royalties shall
be first determined in the currency of the country in which they are earned and
then converted to their equivalent in the currency of the country for which the
parties have agreed royalties shall be paid. The buying rates of exchange for
the currencies involved into the currency agreed to quoted by CITIBANK (or its
successor in interest) in New York, New York for the last business day of the
calendar quarterly period in which the royalties were earned shall be used to
determine any such conversion.
3.9 Restrictions In the event that Cytogen, its Affiliates or its
------------
third party sublicensees are unable as a result of legal or government
restrictions to remit royalties from any country in which sales of Licensed
Products are made, Cytogen, its Affiliates or its third party sublicensees, as
the case may be, shall deposit the appropriate royalties in an account and bank
in
15
<PAGE>
such country agreed by University, such agreement not to be unreasonably
withheld. For so long as such restriction applies, Cytogen, its Affiliates or
third party sublicensees shall be relieved of any further obligations to
University in respect of such royalties except that of reporting to University
under paragraph 3.11 of this Agreement the amounts of royalty payable and so
deposited.
3.10 Taxes Withheld Any income or other tax that Cytogen, its
--------------
Affiliates or its third party sublicensees are required to withhold on behalf of
the University with respect to the royalties payable to the University under
this Agreement shall be deducted from said royalties prior to remittance to the
University; provided however, that in regard to any tax so deducted, Cytogen,
its Affiliates and its third party sublicensees shall give or cause to be given
to the University such assistance as may reasonably be necessary to enable the
University to claim exemption therefrom or credit therefor, and in each case
shall furnish the University proper evidence of the taxes paid on its behalf.
3.11 Records Cytogen, its Affiliates or third party sublicensees shall
-------
keep or cause to be kept accurate records in sufficient detail to enable the
royalties payable hereunder to be determined. Upon reasonable request of the
University Cytogen, its Affiliates or third party sublicensees shall have the
independent
16
<PAGE>
public accountant that audits Cytogen's, its Affiliates' or third party
sublicensees' financial records verify the accuracy of the royalty payments made
or payable hereunder during the preceding calendar year, but only as to any
period ending not more than three (3) years prior to the date of such request.
Said accountant shall disclose to the University only that information which is
necessary to determine the accuracy of royalty payments required under this
Agreement. The University shall pay the cost for any review of records
conducted at the request of the University under this paragraph 3.11, unless
errors of greater than $1,000 owed to the University are found.
4. Diligence
---------
4.1 Reasonable Efforts Cytogen shall use reasonable efforts,
------------------
commensurate with standards commonly followed in the pharmaceutical industry and
the requirements imposed upon manufacturers by governmental agencies, to proceed
diligently with the development, manufacture and sale of Licensed Products and
shall earnestly and diligently offer and continue to offer for sale such
Licensed Products once developed and approved for commercial use, both under
reasonable conditions and consistent with sound business practices, including
those specifically adopted by the management of Cytogen for the conduct of its
overall business, during the term of this Agreement.
17
<PAGE>
4.2 Performance Indicators (a) The parties agree that
----------------------
Cytogen shall meet the following performance indicators for Licensed Products
for in vivo uses:
[ Information omitted and filed separately with the Commission under
Rule 24b-2.
18
<PAGE>
]
4.3 Sublicensing Proposals During Cytogen Sponsorship of Research on TSAR
---------------------------------------------------------------------
Technology It is agreed that, in the period during which Cytogen shall
- - ----------
sponsor, and University hereby acknowledges Cytogen is currently sponsoring,
research on TSAR Technology at University under the provisions of Research
19
<PAGE>
Agreements, University agrees to direct Cytogen to any third party who
approaches University with a proposal for developing a Licensed Product under
Licensed Patents, University Confidential Technology, TSAR Technology and/or
Licensed Know-how. If, in the judgment of Cytogen, such proposal falls outside
Cytogen's own commercial plans, Cytogen agrees in good faith to enter into
negotiations with such third party to sublicense the Licensed Product covered
under the third party proposal under Licensed Patents, University Confidential
Technology, TSAR Technology and or Licensed Know-how on terms solely within the
discretion of Cytogen.
4.4 Sublicensing Plans By Third Party After Termination of Cytogen
--------------------------------------------------------------
Sponsorship of Research on TSAR Technology If, at any time after Cytogen
- - ------------------------------------------
shall terminate its sponsorship of research on TSAR Technology at University
under the provisions of Research Agreements, University shall receive a bona
----
fide plan from a third party to develop a Licensed Product under Licensed
- - ----
Patents, University Confidential Technology, TSAR Technology and/or Licensed
Know-how ("Third Party Plan"), University shall give written notice thereof
(including a copy of the Third Party Plan) to Cytogen. Cytogen agrees to
execute, if appropriate in its judgment, a confidential disclosure agreement in
a form reasonably acceptable to Cytogen with University and such third party, in
order to receive such notice and Plan. In the event Cytogen is not already
developing a Licensed Product as described in the Third Party Plan, or the
commercial development of such Licensed Product is not
20
<PAGE>
reasonably within Cytogen's business plans, Cytogen shall elect one of the
following options:
(a) sublicense its rights to such Licensed Product under Licensed Patents,
University Confidential Technology, TSAR Technology and/or Licensed Know-
how as described in, in conformity with, and limited to, the disclosure in
the Third Party Plan; or,
(b) release to University such of its rights under this Agreement to
Licensed Products under Licensed Patents, University Confidential
Technology, TSAR Technology and/or Licensed Know-how as described in, in
conformity with and limited to, the disclosure in the Third Party Plan.
4.5 Notification by Cytogen Cytogen shall have one hundred and twenty
-----------------------
(120) days after receipt of a Third Party Plan to notify University that (a) it
is already developing a Licensed Product as described in the Third Party Plan;
(b) the commercial development of a Licensed Product is reasonably within
Cytogen's business plans; or, (c) it elects to take one of the courses of action
recited in paragraph 4.4(a) or 4.4(b) hereinabove.
4.6 Negotiation of Sublicense by University In the event Cytogen shall
---------------------------------------
elect to take the course of action identified in paragraph 4.4(a) of this
Article IV, and good faith sublicensing
21
<PAGE>
negotiations shall not be completed within nine (9) months following their
commencement then, in that event, Cytogen shall release to University, in
accordance with the provisions of paragraph 4.4(b) of this Article IV, its
rights to Licensed Product as defined in, in conformity with, and limited to,
the Third Party Plan, whereupon University shall have the right to negotiate a
license with such third party on such Licensed Product; provided however, that
-------- -------
the terms and conditions of such license shall be no more favorable to the third
party licensee than those contained in this Agreement. If the negotiations are
successful and shall be reduced to a written license agreement endorsed by the
third party and University then, in that event, University shall share equally
with Cytogen any revenues derived by the University under the terms of such
license agreement.
4.7 Reporting Within ten (10) days following the first day of January
---------
of each calendar year during the term of this Agreement, Cytogen shall make a
written annual report to University of all progress made in the development of
Licensed Product during the preceding calendar year.
5. Term and Termination
--------------------
5.1 Term This Agreement shall commence on the Effective Date and,
----
unless sooner terminated as herein provided, shall remain in full force and
effect in those countries of the
22
<PAGE>
Licensed Territory wherein a Licensed Patent subsists, until the expiration of
the last to expire of the Licensed Patents that cover a Licensed Product. In
those countries of the Licensed Territory wherein (a) no patent applications
have been filed or (b) patent applications have been filed but have been
abandoned for any reason, the Agreement shall remain in full force and effect
for a period of twenty (20) years from the Effective Date.
5.2 Cytogen's Right to Terminate Cytogen shall have the right to
----------------------------
terminate this Agreement in its entirety upon sixty (60) days written notice to
the University.
5.3 Default In the event that Cytogen shall:
-------
(a) default in a material obligation hereunder, including failure to
make any payments, and fail to remedy such default within sixty (60) days after
notice of such default the University; or
(b) initiate or be placed in a process of liquidation or dissolution
other than for an amalgamation or reorganization; or,
(c) suffer the appointment of a receiver for any substantial portion of
its business who shall not be discharged within sixty (60) days after such
receiver's appointment,
23
<PAGE>
then, in any such event, the University, at its option, may terminate its
obligations to, and the rights of, Cytogen under the license granted in this
Agreement upon thirty (30) days written notice to Cytogen, which termination
shall be effective as of the occurrence of the event giving rise to the option
to terminate.
5.4 Continuing Obligations Any termination or cancellation under any
----------------------
provision of this Agreement shall not relieve Cytogen of its obligation to pay
any royalty or other payments due or owing at the time of such cancellation nor
affect any other rights of either party accrued prior to such termination.
6. Disposition of Licensed Products
--------------------------------
6.1 Upon cancellation of this Agreement or upon termination in whole or
in part, Cytogen shall provide the University with a written inventory of all
University Confidential Technology and Licensed Products in process of
manufacture, in use or in stock. Cytogen shall have the privilege of disposing
of the inventory of such Licensed Products within a period of one hundred and
eighty (180) days of such termination upon conditions most favorable to the
University that Cytogen can reasonably obtain. Cytogen shall also have the
right to complete performance of all contracts requiring use of University
Confidential Technology, Licensed Patents or Licensed Products within and beyond
said 180-day period provided that the remaining term of any such contract does
not
24
<PAGE>
exceed one year. All Licensed Products which are not disposed of as provided
above shall be delivered to the University or otherwise disposed of, in the
University's sole discretion and at the University's expense.
7. Publicity
---------
7.1 Use of University's Name The use of the name of the University, or
------------------------
any contraction thereof, in any manner in connection with the exercise of this
license is expressly prohibited except with the prior written consent of the
University, which shall not be unreasonably withheld.
7.2 By the University The University shall not originate any
-----------------
publicity, news release or other public announcement, written or oral, whether
to the public press or otherwise, relating to the existence of this Agreement;
to the Research Agreements; to any amendment to either agreement or to
performance hereunder, or the existence of an arrangement between the parties
without the prior written consent of Cytogen, which shall not be unreasonably
withheld. It is specifically agreed that University may report the Research
Agreements in its routine reports of sponsored research. Furthermore, all the
foregoing is subject to the provisions of the North Carolina Public Records Act,
G.S. Ch. 132. Cytogen shall be provided with an advance copy of any proposed
publication or oral presentation concerning TSAR Technology and, if in the
opinion of
25
<PAGE>
Cytogen's legal counsel, it is believed any such publication contains (a) a
patentable development, submission or publication shall be delayed to permit the
filing of a patent application or patent applications, but in no event shall
such delay exceed four (4) months from the time Cytogen receives such advance
copy of the proposed publication or presentation; and/or (b) non-patentable but
proprietary trade secret information belonging to Cytogen, then such publication
shall be re-written to eliminate such proprietary trade secret information.
8. University Use
--------------
8.1 It is understood and agreed that the University shall be free to use
University Confidential Technology and Licensed Products for its own research
and/or educational purposes without any payment of royalty fees but may not
commercialize the same.
9. Patents
-------
9.1 Prosecution and Maintenance Cytogen shall bear the cost of preparing,
---------------------------
filing, prosecuting and maintaining United States and foreign patent
applications concerning Licensed Products. The University and Cytogen have
agreed that all patent applications, United States and foreign, concerning TSAR
technology developed by the University shall be filed on behalf of the
University by Pennie & Edmonds, a Patent Law firm whose offices are
26
<PAGE>
at 1155 Avenue of the Americas, New York, New York 10036; that copies of all
correspondence, letters, amendments, Office Actions and other communications
among Pennie & Edmonds, its local Patent Counsel and the respective governmental
Patent Offices shall be forwarded by Pennie & Edmonds to the University and
Cytogen; that Pennie & Edmonds shall forward all invoices for legal services
rendered by Pennie & Edmonds and its local Patent Counsel, including debit notes
for fees paid by Pennie & Edmonds to local governmental Patent Offices, directly
to Cytogen for payment by Cytogen.
9.2 Decisions to File Patent Applications In the event in its sole
-------------------------------------
discretion, Cytogen elects to obtain patent coverage on subject matter relating
to Licensed Products or University Confidential Technology, in the United States
and in foreign countries in the name of the inventor or in the name of the
University, as the case may be, Cytogen shall so advise the University, in
writing, and the provisions of paragraph 9.1 shall apply. Conversely, in the
event Cytogen elects not to obtain patent coverage on subject matter relating to
Licensed Products or University Confidential Technology, it shall so advise the
University in writing and the University shall have the option to file such
patent applications on its own behalf, at its own cost and expense, and Cytogen
shall thereafter have no rights under such applications and resulting patents.
27
<PAGE>
9.3 Discontinuance of Expenditures In the event Cytogen elects to
------------------------------
discontinue the payment of all expenditures in connection with the prosecution
and maintenance of Licensed Patents, then Cytogen shall provide notice in due
time to the University so that the University, or its nominee, at its option,
can substitute for Cytogen all proceedings for prosecuting or maintaining
Licensed Patents, and Cytogen will thereafter have no rights under such Licensed
Patents.
10. Enforcement
-----------
10.1 Infringement by Cytogen In the event a patent is issued in the
-----------------------
Licensed Territory to a third party containing patent claims applicable to
Licensed Products and Cytogen is sued or threatened with suit by such third
party charging infringement of such patent resulting from the manufacture, use
or sale by Cytogen of one or more Licensed Products, Cytogen shall promptly
notify the University of such suit or threatened suit. Thereupon Cytogen shall
have the right, at Cytogen's sole discretion either:
(a) to stop manufacture, use and/or sale of the subject
Licensed Product and to stop all royalty payments upon giving the
University one (1) month written notice; or,
(b) to continue to manufacture, use and/or sell the
subject Licensed Product and to stand suit for
28
<PAGE>
patent infringement at its own cost and expense.
10.2 Infringement by Third Parties/Suit by the University
----------------------------------------------------
Either party shall promptly notify the other party of any infringement of any
Licensed Patents. Each party shall provide the other party with all available
evidence relating thereto. Cytogen and the University shall then consult with
each other as to the best manner in which to proceed. The University shall have
the right, but not the obligation, to bring, defend and maintain any appropriate
suit or action. If the University requests Cytogen to join the University in
such suit or action and Cytogen agrees to do so, Cytogen shall execute all
papers and perform such other acts as may be reasonably required and may, at its
option and at its expense, be represented by counsel of its choice. Should the
University lack standing to bring any such action, then the University may cause
Cytogen to do so upon first undertaking to indemnify and hold Cytogen harmless
(to the extent permissible by law) from all consequent liability and to promptly
reimburse Cytogen for all reasonable expenses (including attorney fees) stemming
therefrom. [ Information omitted and filed separately with the Commission
under Rule 24b-2.
]
10.3 Infringement by Third Parties/Suit by Cytogen
---------------------------------------------
29
<PAGE>
In the event the University fails to take action with respect to the matters
provided for in paragraph 10.2 hereinabove within a reasonable period of time,
but not more than three (3) months following receipt of such notice and
evidence, Cytogen shall have the right, but not the obligation, to bring defend
and maintain any appropriate suit or action. If Cytogen finds it necessary to
join the University in such suit or action, the University shall after receiving
the approval of the Attorney General of North Carolina, execute all papers and
perform such other acts as may be reasonably required and may, at its option and
expense, be represented by counsel of its choice. In the event Cytogen does
join the University in such suit or action, Cytogen shall indemnify and hold
harmless the University from all liability arising from such suit or action.
Absent an agreement between the parties to jointly bring any action or suit
hereunder and to share the expenses thereof, any amount recovered in any such
action or suit shall be retained by the party bringing the suit and bearing its
expenses. All royalties due the University in the event Cytogen brings suit
according to this paragraph 10.3 shall be placed in escrow by Cytogen during the
pendency of such suit and any costs of suit, if reasonable in nature and amount,
shall be paid therefrom and the balance remitted to the University upon
termination of such suit. [ Information omitted and filed separately with
the Commission under Rule 24b-2.
]
30
<PAGE>
10.4 Judgment In the event of a judgment in any suit requiring
--------
Cytogen to pay a royalty to a third party, or in the event of a settlement of
such suit requiring royalty payments to be made, [ Information omitted and
filed separately with the Commission under Rule 24b-2.
]
11. Confidentiality
---------------
11.1 Ownership and Confidentiality
-----------------------------
a) All information characterizable as Licensed Know-how and University
Confidential Technology developed by the University pursuant to the Research
Agreements which shall be disclosed to Cytogen to fulfill the intent and
objectives of this Agreement shall be held in confidence by Cytogen and shall be
and remain the property of the University. Cytogen hereby agrees to maintain
the confidentiality of all writings from the University relating to Licensed
Know-how and University Confidential Technology for a period of three (3) years
from the date of receipt by Cytogen.
b) All Cytogen Technology which shall be disclosed to the University
to fulfill the intent and objectives of this Agreement shall be held in
confidence by the University and shall remain the property of Cytogen. The
University hereby agrees to maintain the confidentiality of all writings from
Cytogen to the University
31
<PAGE>
relating to Cytogen Technology for a period of three (3) years from the date of
receipt by the University.
11.2 Exceptions to Confidentiality The obligations of paragraph 11.1 shall
-----------------------------
not apply to written disclosures of Licensed Know-how and University
Confidential Technology by the University to Cytogen and Cytogen Technology by
Cytogen to the University which:
(i) were in the receiving party's possession prior to receipt from the
transferring party as evidenced by the receiving party's written records; or,
(ii) were in the public domain at the time of receipt from the
transferring party; or,
(iii) become part of the public domain through no fault of the receiving
party; or,
(iv) were lawfully received by the receiving party from a third party
not prohibited from making such disclosures to the receiving party; or,
(v) shall be required to be disclosed in a judicial or administrative
proceeding after legal remedies for maintaining the subject matter in confidence
have been exhausted;
32
<PAGE>
or,
(vi) shall be lawfully required to be disclosed by the receiving party
to the United States Food & Drug Administration or other regulatory governmental
agency.
(vii) shall be independently developed by personnel of the receiving
party who were not privy to the Licensed Know-how, University Confidential
Technology or Cytogen Technology.
12. Waiver
------
12.1 No failure or delay by any party to insist upon the strict performance
of any term, agreement, condition or covenant of this Agreement, or to exercise
any right, power or remedy hereunder or consequent upon a breach hereof, shall
constitute a waiver of any such term, agreement, condition, covenant, right,
power or remedy or of any such breach or preclude such party from exercising any
such right, power or remedy at any later time or times.
13. Assignment
----------
13.1 Neither party shall assign its rights or obligations under this
Agreement without the prior written consent of the other party; provided
however, it may be assigned without consent to the corporate successor of
Cytogen or to a corporation acquiring all or
33
<PAGE>
substantially all of the business or assets of Cytogen.
14. Independent Contractor Status
-----------------------------
14.1 Neither party hereto is an agent of the other for any purpose.
15. Notice
------
15.1 Any notice required or permitted to be given to the parties hereto shall
be deemed to have been properly given if delivered in person or mailed by first-
class certified mail to the other party at the appropriate address as set forth
below or to such other addresses as may be designated in writing by the parties
from time to time during the term of this Agreement.
If to the University:
Office of Research Services
CB #4100 Bynum Hall
UNC-CH
Chapel Hill, NC 27599-4100
Attention: David E. Broome, Jr.
if to Cytogen:
John D. Rodwell, Ph.D.
Vice President, Research & Development
34
<PAGE>
Cytogen Corporation
201 College Road East-CN-5309
Princeton, New Jersey 08540-5309
with copies to:
William J. Ryan, Esq.
Vice President and General Counsel
Cytogen Corporation
600 College Road East-CN-5308
Princeton, New Jersey 08540-5308
16. No Indemnity by the University
------------------------------
16.1 Cytogen shall be responsible for its own acts relating to the
manufacture, use and sale of Licensed Products and will indemnify and hold
harmless the University from and against any liabilities or claims of liability
arising out of Cytogen's exercise of this Agreement. The University shall not
indemnify Cytogen for costs, expenses, liability, damages and claims for any
injury or death to persons or damage to or destruction of property or other loss
arising out of or in connection with any Licensed Products made, used or sold by
Cytogen. Cytogen shall not indemnify or hold harmless the University against any
liabilities or claims of liability against the University based on or arising
out of any negligence or action of the University or any of its employees,
35
<PAGE>
including further research at the University or elsewhere on TSAR Technology.
17. Governing Law
-------------
17.1 This Agreement shall be interpreted and construed in accordance with the
laws of the State of North Carolina.
18. Complete Agreement
------------------
18.1 The terms and provisions contained in this Agreement constitute the
entire understanding between the parties hereto and supersede any and all prior
written and oral agreements concerning the subject matter contained herein
except the Research Agreements, which currently subsist and continue to be in
full force and effect.
This Agreement may not be released, discharged, abandoned, changed or modified
in any manner except by an instrument in writing signed by a duly authorized
officer or representative of each of the parties hereto.
36
<PAGE>
IN WITNESS WHEREOF, both the University and Cytogen have executed this Agreement
in duplicate originals by their respective officers hereunto duly authorized,
the day and year first above-written. Inventors have likewise indicated their
acceptance of the terms hereof by signing below.
THE UNIVERSITY OF NORTH CAROLINA CYTOGEN CORPORATION
AT CHAPEL HILL
By: /s/ Wayne R. Jones /s/ John D. Rodwell
----------------------------- -----------------------------
Name: Wayne R. Jones Name : John D. Rodwell, Ph.D.
Title: Vice Chancellor, Title: Vice President,
Business and Finance Research & Development
INVENTORS:
/s/ Brian K. Kay
--------------------------------
/s/ Dana M. Fowlkes
--------------------------------
--------------------------------
37
<PAGE>
Schedule A
Licensed Patents
<TABLE>
<CAPTION>
Title/Inventors SN/Filing Date Status
----------------- -------------- ---------
<S> <C> <C> <C>
United States Totally Synthetic 07/480,420 Abandoned
Affinity Reagents Feb 15 90
Fowlkes/Kay
United States Totally Synthetic 07/854,133 Office
Affinity Reagents Action
Fowlkes/Kay-CON Mar 19 92 Received
PCT Totally Synthetic US91/01013 Demand
Affinity Reagents Feb 14 91
Filed
Fowlkes/Kay Sep 12 91
</TABLE>
Designated
States:
Austria
Belgium
Canada
Switzerland
Germany
Denmark
Spain
France
Great Britain
Greece
Italy
Japan
Luxembourg
Netherlands
Sweden
38
<PAGE>
Schedule B
Research Agreements
AGREEMENT BETWEEN CYTOGEN CORPORATION AND THE UNIVERSITY OF NORTH
CAROLINA AT CHAPEL HILL
Dated 4 June 1986
Letter, McKearn (Cytogen) to Fowlkes (UNC) regarding termination of
sponsored research agreement
Dated 18 October 1988
Letter, Fowlkes (UNC) to McKearn (Cytogen) expressing interest in
continuing sponsored research
Dated 21 December 1988
Letter, Fowlkes (UNC) to McKearn (Cytogen) submitting outline of
experiments and budget for continuing sponsored research
Dated 5 January, 1990
CONFIDENTIALITY AND SPONSORED RESEARCH AGREEMENT Dated 26 June 1990
CONFIDENTIALITY AND SPONSORED RESEARCH AGREEMENT AMENDMENT
Dated 7 December 1991
Letter, Rodwell (Cytogen) to Fowlkes (UNC) committing Cytogen to
extension of said agreement through the 2nd quarter 1992
Dated 22 January 1992
Letter, Rodwell (Cytogen) to Kay (UNC) committing Cytogen to extension
of said agreement through the 3rd/4th quarter 1992
Dated 22 June 1992
Letter, Rodwell (Cytogen) to Kay (UNC) committing Cytogen to extension
of said agreement thru the 4th quarter 1992 Dated 9 July 1992
Letter, Rodwell (Cytogen) to Kay (UNC) committing Cytogen to extension
of said agreement thru December 31, 1994
Dated 26 October 1992
39
<PAGE>
AGREEMENT
between
The University of North Carolina at Chapel Hill
and
Cytogen Corporation
This Agreement amends and becomes a part of the License entered into as of
March 10, 1993, by and between
The University of North Carolina at Chapel Hill (hereinafter "University"), 300
Bynum Hall, Chapel Hill, N.C., and
Cytogen Corporation (hereinafter "Cytogen"), 600 College Road East CN 5308,
Princeton N.J. 08540-5308.
This amendment is effective as of the 4 day of April , 1994.
---------- -----------
In consideration of the premises and the mutual covenants herein recited, and
other good and valuable considerations, the receipt of which is acknowledged, it
is agreed as follows:
Paragraph 9.1 of the License Agreement is revised as follows:
9.1 Prosecution and Maintenance Cytogen shall bear the cost of preparing,
---------------------------
filing, prosecuting and maintaining United States and foreign patent application
concerning Licensed Products. The University and Cytogen have agreed that all
patent applications, United States and foreign, concerning TSAR technology
developed by the University shall be filed on behalf of the University by Patent
Counsel appointed by Cytogen; that Cytogen shall inform the University in
writing of the Counsel appointed; that copies of all correspondence, letters,
amendments, Office Actions and other communications among Patent Counsel and the
respective governmental Patent Offices shall be forwarded by Patent Counsel to
the University and Cytogen; that Patent Counsel shall forward all invoices for
legal services rendered by Patent Counsel including debit notes for fees paid by
Patent Counsel to local governmental Patent Offices, directly to Cytogen for
payment by Cytogen.
IN WITNESS WHEREOF, The University and Cytogen have executed this Amendment in
duplicate originals by their respective officers hereunto duly authorized, the
day and year first above-written. Inventors likewise indicated their acceptance
of the terms hereof by signing below.
THE UNIVERSITY OF NORTH CAROLINA CYTOGEN CORPORATION
AT CHAPEL HILL
By: /s/ Wayne R. Jones /s/ John D. Rodwell
------------------------------- ----------------------------
Name: Wayne R. Jones John D. Rodwell, Ph.D.
Title: Vice Chancellor, Vice President,
Business and Finance Research & Development
INVENTORS:
/s/ Brian K. Kay /s/ Dana M. Fowlkes
- - ---------------------------------- ----------------------------
Brian K. Kay Dana M. Fowlkes
<PAGE>
LICENSE AGREEMENT AMENDMENT
THIS LICENSE AGREEMENT AMENDMENT (hereinafter "Amendment") is made and
entered into this 17th day of November , 1994 by and between THE
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL, having an address at 300 Bynum
Hall, Chapel Hill, North Carolina 27599 (hereinafter "University"), and CYTOGEN
Corporation, with offices at 600 College Road East, CN 5308, Princeton, New
Jersey 08540-5308 (hereinafter "CYTOGEN").
(a) University and CYTOGEN entered into a License Agreement dated March 10,
1993 (hereinafter "Agreement").
(b) University and CYTOGEN wish to amend the Agreement as follows:
(a) In Section 1.5, line 3, after "TSAR Technology" insert "inventions
made by University."
(b) In Section 2.1, after "Licensed Patents," insert "TSAR Technology,".
(c) The Amendments of Paragraph 2 are effective as of March 10, 1993, that
is, they shall be deemed to be part of the License Agreement as of the Effective
date.
(d) All definitions of the Agreement apply to this Amendment.
(e) The Agreement shall remain in full force and effect.
THE UNIVERSITY OF NORTH CYTOGEN CORPORATION
CAROLINA AT CHAPEL HILL
By: /s/ Wayne R. Jones By: /s/ John D. Rodwell
--------------------------- ---------------------------
Name: Wayne R. Jones Name: John D. Rodwell, Ph.D.
-------------------------
Vice Chancellor
Title: Business and Finance Title: Vice President,
------------------------ Research & Development
Inventors:
/s/ Brian K. Kay
------------------------------
/s/ Dana M. Fowlkes
------------------------------
<PAGE>
[CONFIDENTIAL
TREATMENT
REQUESTED]
OPTION AND LICENSE AGREEMENT
Between
SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH
and
CYTOGEN CORPORATION
Effective the 1st day of July, 1993
<PAGE>
OPTION AND LICENSE AGREEMENT BETWEEN
SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH
AND
CYTOGEN CORPORATION
I. BACKGROUND............................................ 1
A. Heads of Agreement.............................. 1
B. Confidentiality Agreement....................... 1
C. Licensor Representation Regarding Rights Granted 2
II. DEFINITIONS........................................... 2
A. Licensor........................................ 2
B. Licensee........................................ 2
C. Agreement....................................... 2
D. Affiliate....................................... 2
E. Confidential Information........................ 3
F. Covered By...................................... 4
G. Date of Commercialization....................... 4
H. Effective Date.................................. 5
I. Entity.......................................... 5
J. Gene Technology................................. 5
K. Government...................................... 5
L. Know-How........................................ 5
M. Licensed Patent(s).............................. 6
N. Licensed Process................................ 6
O. Licensed Product................................ 6
P. Licensed Technology............................. 6
Q. Net Sales....................................... 7
R. Patent Counsel.................................. 8
S. Sublicensee..................................... 8
T. Territory....................................... 8
U. Use/Using....................................... 8
III. GRANTS................................................ 9
A. Grant of Option................................. 9
B. Exercise of Option.............................. 9
C. Grant of License................................ 9
D. Rights to Sublicense............................ 9
E. Rights Reserved................................. 10
IV. TERM AND TERMINATION.................................. 11
A. Term of Option.................................. 11
B. Term of Agreement............................... 11
C. CYTOGEN'S Rights to Termination................. 11
D. SKI'S Rights to Termination..................... 12
<PAGE>
E. Results of Termination..................... 12
V. OPTION AND LICENSING CONSIDERATION................ 13
A. Option Fee................................. 13
B. License Issue Fee.......................... 13
C. Prior Patent Expenses...................... 13
VI. ROYALTIES......................................... 13
A. Earned Royalties........................... 13
B. Minimum Royalties.......................... 14
C. Single Royalty Per Licensed Product........ 14
VII. PAYMENTS AND REPORTS.............................. 15
A. Payments................................... 15
B. Interest................................... 15
C. Payments in U.S. Dollars................... 16
D. Reports.................................... 17
VIII.PERFORMANCE....................................... 18
A. Gene Technology............................ 18
B. Other Technology........................... 19
IX. CONFIDENTIAL INFORMATION RESTRICTIONS............. 19
A. Protection Requirements.................... 19
X. PATENT MAINTENANCE AND MARKINGS................... 19
A. Patent Filing, Prosecution, and Maintenance 19
B. Patent Counsel............................. 20
C. Cooperation Between the Parties............ 20
D. Patent Markings............................ 21
XI. WARRANTIES........................................ 21
A. Warranties, Rights, and Liabilities........ 21
XII. INFRINGEMENT...................................... 22
A. Obligation to Notify....................... 22
B. Infringement by SKI/CYTOGEN................ 22
C. Infringement by Third Parties.............. 23
D. Judgement.................................. 24
XIII.GENERAL PROVISIONS................................ 24
A. Assignment................................. 24
B. Entire Agreement........................... 25
C. Export Control............................. 25
D. Force Majeure.............................. 26
E. Governing Law.............................. 26
F. Headings................................... 26
<PAGE>
G. Independence of the Parties 27
H. Notices.................... 27
I. Modifications.............. 28
J. Use of Name................ 28
K. Waiver of Rights........... 28
L. Signatures................. 29
EXHIBIT B. . . . . . LICENSED PATENTS
<PAGE>
Option and License Agreement Between
Sloan-Kettering Institute for Cancer Research
and
Cytogen Corporation
Effective the 1st day of July, 1993 (hereinafter the "EFFECTIVE DATE"),
Sloan-Kettering Institute for Cancer Research (hereinafter referred to as
"SKI"), a New York membership corporation with principal offices at 1275 York
Avenue, New York, New York 10021, and
Cytogen Corporation (hereinafter referred to as "CYTOGEN"), a Delaware business
corporation with principal offices at Princeton, New Jersey,
in consideration of the mutual covenants and obligations hereinafter contained,
and other good and valuable consideration, agree as follows:
I. BACKGROUND
A. Heads of Agreement
The parties signed a "Memorandum of Heads of Agreement" dated as of
January 22, 1993, which expressed the parties intention to enter into this
AGREEMENT and the salient points to be set forth in this AGREEMENT. This
AGREEMENT supersedes the Memorandum of Heads of Agreement.
B. Confidentiality Agreement
The parties signed a "Confidentiality Disclosure Agreement" dated as
of April 30, 1992, identified as Exhibit A, which is attached hereto,
merged into and made a part hereof.
1
<PAGE>
C. Licensor Representation Regarding Rights Granted
SKI represents that, except for certain rights of the GOVERNMENT, it
has the legal right to grant the Option and License free of legal
encumbrances, restraints or restrictions which could adversely affect the
rights of CYTOGEN and that there are not outstanding agreements,
understandings or arrangements inconsistent with the provisions of this
Agreement.
II. DEFINITIONS
A. Licensor
"Sloan-Kettering Institute for Cancer Research," as abbreviated "SKI,"
means the New York membership corporation by that name having its principal
office at 1275 York Avenue, New York, New York 10021, and shall also
include all SKI AFFILIATES. SKI is the licensor in this AGREEMENT.
B. Licensee
"Cytogen Corporation," as abbreviated "CYTOGEN," means the Delaware
business corporation by that name having its principal office at Princeton,
New Jersey, and shall also include all CYTOGEN AFFILIATES. CYTOGEN is the
licensee in this AGREEMENT.
C. Agreement
"AGREEMENT" means the option and license agreement, defined by the
document in which this paragraph appears. This AGREEMENT is between Sloan-
Kettering Institute for Cancer Research, as licensor, and Cytogen
Corporation, as licensee. Also included in this AGREEMENT are all Exhibits
attached hereto and all amendments which may be made thereto.
D. Affiliate
"AFFILIATE" means, with respect to CYTOGEN, any individual or ENTITY
which directly or indirectly controls, is controlled by, or is under common
control with such party. The term "control" means possession, direct or
indirect, of the
2
<PAGE>
powers to direct or cause the direction of the management or policies of a
person or ENTITY; whether through ownership of equity participation, voting
securities, or beneficial interests; by contract; by agreement; or
otherwise.
With regard to SKI, AFFILIATE means Memorial Sloan-Kettering Cancer
Center and Memorial Hospital for Cancer and Allied Diseases.
E. Confidential Information
1. "CONFIDENTIAL INFORMATION" means (i) documented information
originated by the disclosing party which is not generally available to
others; or (ii) information obtained through inspection of the
facilities of the disclosing party, or through equipment or samples of
product supplied by the disclosing party, or through verbal disclosure
by the disclosing party; provided that such information shall be
specifically identified by the disclosing party in written form as
being CONFIDENTIAL INFORMATION; and provided further that any
information that is disclosed orally shall be confirmed in written
summary form by the disclosing party within ten (10) days of the date
of oral disclosure.
2. The confidentiality and non-use obligations of this AGREEMENT
shall not apply to CONFIDENTIAL INFORMATION which either
party shall be able to demonstrate:
(a) was in its possession prior to receipt from the other party,
provided however Proprietary Information disclosed under the
Confidentiality Agreement attached as Exhibit A shall be
considered and treated as Confidential Information under this
Agreement not subject to this subparagraph (i);
(b) was in the public domain at the time of receipt from the
other party;
3
<PAGE>
(c) shall have become part of the public domain through no fault
of the party to whom the CONFIDENTIAL INFORMATION was disclosed;
(d) was lawfully received by the party to whom CONFIDENTIAL
INFORMATION was disclosed from a third party not prohibited from
disclosing it to such party;
(e) was subsequently and independently developed by employees of
the party to whom CONFIDENTIAL INFORMATION was disclosed, who had
no knowledge of the CONFIDENTIAL INFORMATION disclosed;
(f) shall be required to be disclosed in a judicial or
administrative proceeding after legal remedies for maintaining
the CONFIDENTIAL INFORMATION in confidence shall have been
exhausted and after notice of such proceeding has been given to
the other party; or
(g) shall be required to be disclosed in a proceeding or activity
to obtain GOVERNMENT agency approvals for developing or marketing
LICENSED PRODUCTS.
F. Covered By
"COVERED BY" means LICENSED PRODUCT(S), the manufacture, USE, sale, or
practice of which would constitute, but for the license rights granted in
this AGREEMENT, an infringement of any valid LICENSED PATENT claim or
claims or other LICENSED TECHNOLOGY intellectual property rights.
G. Date of Commercialization
"DATE OF COMMERCIALIZATION" means the date when the first NET SALE is
made. LICENSED PRODUCT(S) distributed or USED for experimental purposes
only shall not establish the DATE OF COMMERCIALIZATION.
4
<PAGE>
H. Effective Date
"EFFECTIVE DATE" means the 1st day of July, which is the date upon
which this AGREEMENT becomes effective.
I. Entity
"ENTITY" means a corporation, an association, a joint venture, a
partnership, a trust, a business, an individual, including an agency, or
any other organization
which can exercise independent legal standing.
J. Gene Technology
"GENE TECHNOLOGY" means that part of LICENSED TECHNOLOGY that pertains
to any DNA encoding the prostate specific membrane ("PSM") antigen or any
portion of the PSM antigen and any DNA, cDNA, and other derivative or
portion of said gene that expresses the PSM antigen, including, but not
limited to, diagnostic methods employing DNA probes or PCR techniques to
detect prostate cancer and gene therapy applications.
K. Government
"GOVERNMENT" means the Federal Government of the UNITED STATES.
L. Know-How
"KNOW-HOW" means the skill or ingenuity based upon the body of
knowledge and data which comprise all of the methods, processes, designs,
engineering information, trade secrets, and other information and data
relating to prostate specific membrane (PSM) antigen recognized by the
monoclonal antibody CYT-356, any subunits of such antigen, any other
monoclonal antibodies or binding proteins or peptides recognizing such
antigen and any gene or gene segment encoding for such antigen or portion
of such antigen, CONFIDENTIAL INFORMATION and GENE TECHNOLOGY which SKI
develops, employs in its own activities, or has available for USE prior to
or during the term of this AGREEMENT.
5
<PAGE>
M. Licensed Patent(s)
"LICENSED PATENT(S)" means those patents and/or patent applications
listed in Exhibit B, which is attached hereto and made a part hereof, and
any and all continuations, continuations-in-part, divisions, patents of
addition, reissues, reexaminations, or extensions of the foregoing, or any
patents which shall issue based on the listed patent applications.
LICENSED PATENTS also include future patent applications, and any and all
continuations, continuations-in-part, divisions, patents of addition,
reissues, reexaminations, or extensions thereof, or any patents which
shall issue based on future patent applications, the valid claims of which
shall cover LICENSED TECHNOLOGY developed during the term of this
AGREEMENT.
N. Licensed Process
"LICENSED PROCESS" means any process or method the USE or practice of
which would infringe one or more valid LICENSED PATENT claims or which
incorporates or makes USE of any part of the LICENSED TECHNOLOGY.
O. Licensed Product
1. "LICENSED PRODUCT" means any product, apparatus, method, or service the
production, manufacture, sale, USE, or practice of which would infringe one
or more valid issued LICENSED PATENT claims.
P. Licensed Technology
"LICENSED TECHNOLOGY" means information and data relating to prostate
specific membrane (PSM) antigen recognized by the monoclonal antibody CYT-
356, any subunits of such antigen, any other monoclonal antibodies or
binding proteins or peptides recognizing such antigen and any gene or gene
segment encoding for such antigen or portion of such antigen owned by SKI
as of the EFFECTIVE DATE or acquired during the term of this AGREEMENT;
including without limitations, inventions, biological materials, computer
programs, technical data, apparatus and KNOW-HOW, GENE TECHNOLOGY and
CONFIDENTIAL INFORMATION, whether patentable or unpatentable.
6
<PAGE>
Q. Net Sales
1. "NET SALES" means the gross sales price or fees; whether or not
invoiced, billed, or received by CYTOGEN or a SUBLICENSEE from a third
party attributable to CYTOGEN's or its SUBLICENSEE's USE, sale, or transfer
of any LICENSED PRODUCT; less [ Information omitted and filed
separately with the Commission under Rule 24b-2.
]
2. A LICENSED PRODUCT shall be deemed USED, sold, or transferred at
the time CYTOGEN, or its SUBLICENSEE, USES or performs services for
commercial purposes using such LICENSED PRODUCT, bills, invoices, ships, or
receives payment for such LICENSED PRODUCT, whichever event occurs first.
3. In the event that a product is sold in the form of a combination
product containing one or more pharmaceutically or diagnostically active
ingredients in addition to LICENSED PRODUCT, NET SALES for such a
combination product shall be calculated by multiplying the actual NET SALES
by thre fraction A/(A+ B), where A is the invoice price of the given
LICENSED PRODUCT if sold separately by CYTOGEN and B is the total invoice
price of any other such pharmaceutically or diagnostically active
ingredient(s) in the combination if sold separately by CYTOGEN. If the
given LICENSED PRODUCT and the other such active ingredient(s) are not sold
separately by CYTOGEN, NET SALES for purposes of determining royalties
shall be calculated by multiplying NET SALES of the
7
<PAGE>
combination by the fraction C/(C+D), where C is CYTOGEN's or SUBLICENSEE's
total actual cost of LICENSED PRODUCT at the point of formulation into the
combination product and D is CYTOGEN's or SUBLICENSEE's total actual cost
of other pharmaceutically or diagnostically active ingredient(s) included
in the combination product at the point of formulation.
4. LICENSED PRODUCT(S) USED in testing, clinical trials, or as marketing
samples to develop or promote the LICENSED PRODUCT(S) shall not be included
as LICENSED PRODUCT(S) USED, sold, or transferred under the definition of
NET SALES; provided the LICENSED PRODUCT(S) are supplied to the user at
no cost. Sales between CYTOGEN and any Affiliate or SUBLICENSEE shall not
be included in NET SALES. No sales of LICENSED PRODUCT shall be counted
more than once in the calculation of NET SALES.
R. Patent Counsel
"PATENT COUNSEL" means any patent attorney representing either CYTOGEN
or SKI, on matters related to the LICENSED PATENTS, where such attorney has
written power of attorney authorizing such representation.
S. Sublicensee
"SUBLICENSEE" means any ENTITY, not an AFFILIATE of CYTOGEN,
which is licensed by CYTOGEN, pursuant to the authority granted in this
AGREEMENT, with rights to the LICENSED PATENT(S) beyond those rights
commonly granted an end user.
T. Territory
"TERRITORY" means the world.
U. Use/Using
"USE" means any form of practice or utilization of the LICENSED
PATENT(S), LICENSED PRODUCT(S), or any portion thereof.
8
<PAGE>
III. GRANTS
A. Grant of Option
Subject to the terms and conditions of this AGREEMENT, SKI hereby
grants to CYTOGEN an exclusive option to take an exclusive world-wide
LICENSE under LICENSED PATENTS and LICENSED TECHNOLOGY for a term beginning
at the EFFECTIVE DATE and extending until six (6) months after the issuance
of the first U.S. LICENSED PATENT.
B. Exercise of Option
The option granted herein may be exercised by CYTOGEN at any time
before six months after issuance of the first U.S. LICENSED PATENT by
delivery to SKI of a written notice of exercise of the option and payment
of the license issue fee.
C. Grant of License
Subject to the terms and conditions of this AGREEMENT, upon exercise
by CYTOGEN of its option rights, identified in Article III, Paragraph A
hereinabove CYTOGEN shall have the exclusive rights in the TERRITORY, with
the right to grant sublicenses as hereinafter provided, to make, have made,
use and sell, for the term of this AGREEMENT (i) LICENSED PRODUCTS
utilizing the LICENSED PATENTS and LICENSED TECHNOLOGY and (ii) products
utilizing LICENSED TECHNOLOGY.
D. Rights to Sublicense
1. The license rights granted under this AGREEMENT shall specifically
include the right for CYTOGEN to grant sublicenses, subject to the further
conditions of this AGREEMENT.
2. Any sublicense grant of rights under this AGREEMENT by CYTOGEN shall
be subject to the terms and conditions of this Agreement. The due and
punctual performance of any SUBLICENSEE shall be guaranteed by CYTOGEN.
9
<PAGE>
3. Within thirty (30) days after the execution of a sublicense agreement,
as authorized herein, CYTOGEN shall notify SKI of such sublicense agreement
and provide SKI with the name and address of the SUBLICENSEE.
4. Each sublicense shall specifically reference this AGREEMENT and all
rights which revert to SKI upon termination of this Agreement.
5. CYTOGEN shall annually forward to SKI a copy of royalty reports
received by CYTOGEN from its SUBLICENSEE(s) during the preceding twelve
(12) month period. Such reports must contain adequate detail to allow SKI
to confirm the accuracy of royalty payments received from each SUBLICENSEE.
6. All royalty payments made by or on behalf SUBLICENSEES, as required by
this AGREEMENT, shall be made in United States of America currency, unless
otherwise approved in advance by SKI.
7. No sublicense agreement shall relieve CYTOGEN of any of its obligations
under this AGREEMENT, including the obligation to pay SKI royalties on
LICENSED PRODUCT(S).
8. Each sublicense agreement shall include a provision stating that the
sublicense agreement shall automatically be modified or terminated, in
whole or in part, upon any relevant modification or termination, in whole
or in part, of this AGREEMENT. Such modification or termination of the
sublicense agreement shall be consistent with and reflect the relevant
modifications or termination of this AGREEMENT.
E. Rights Reserved
1. Notwithstanding the exclusive license granted herein, SKI specifically
reserves unto itself only, the right to use LICENSED PATENTS and LICENSED
TECHNOLOGY exclusively limited to scientific and clinical research in its
own facilities which shall not be competitive with any LICENSED PRODUCTS
10
<PAGE>
developed by CYTOGEN. Any commercially useful or valuable results of such
research shall be included in LICENSED PATENTS and LICENSED
TECHNOLOGY.
2. All rights granted in this AGREEMENT are expressly granted subject to
the rights of the GOVERNMENT, and such rights are specifically reserved by
this AGREEMENT to the GOVERNMENT.
IV. TERM AND TERMINATION
A. Term of Option
The term of the option granted in Article III, Paragraph A hereinabove
shall commence on the EFFECTIVE DATE and shall end six months after the
issuance of the first to issue U.S. LICENSED PATENT, unless it earlier
terminates by acts of the parties in accordance with the terms of this
AGREEMENT.
B. Term of Agreement
The term of this AGREEMENT shall commence on its EFFECTIVE DATE
and shall end on the date of expiration of the last to expire of the
LICENSED PATENTS unless it earlier terminates by operation of law or by
acts of the parties in accordance with the terms of this AGREEMENT. Upon
termination of this Agreement other than due to breach by CYTOGEN or
voluntary termination by CYTOGEN, CYTOGEN shall have a fully paid license
for LICENSED PATENTS and LICENSED TECHNOLOGY.
C. CYTOGEN'S Rights to Termination
CYTOGEN may terminate this AGREEMENT or the License after exercise
of the Option by giving written notice of its intent to terminate at least
sixty (60) days prior to actual termination.
11
<PAGE>
D. SKI'S Rights to Termination
1. Upon any material breach of or default under this AGREEMENT by CYTOGEN,
SKI may terminate this AGREEMENT. in which event SKI shall give CYTOGEN,
and all SUBLICENSEE(S) of record, written notice of termination prior to
terminating this AGREEMENT. Such notice shall state with reasonable detail
and clarity the cause(s) for termination. Within forty five (45) days after
the effective date of such notice, if CYTOGEN or a SUBLICENSEE shall not
have remedied the material breach or default, then this AGREEMENT and all
rights granted CYTOGEN and any SUBLICENSEE(S) shall automatically terminate
at the end of the forty fifth (45th) day.
2. Upon termination of this AGREEMENT, any SUBLICENSEE of record
which has not breached, in any material way, its sublicense related to the
LICENSED PATENT(S) and LICENSED TECHNOLOGY, shall have the right to receive
a license to the LICENSED PATENT(S) and LICENSED TECHNOLOGY, directly from
SKI, granting rights substantially the same as those granted in the
sublicense and containing obligations as a licensee similar to those set
forth in this AGREEMENT.
3. Subject to ARTICLE XIII, Paragraph A, in the event CYTOGEN ceases
conducting business in a normal course, becomes insolvent, makes a general
assignment for the benefit of creditors, suffers or permits the appointment
of a receiver for its business or assets, or avails itself of, or becomes
subject to, any proceeding under the Federal Bankruptcy Act or any other
statute of any state or country relating to insolvency or the protection of
creditor rights, this AGREEMENT shall immediately and automatically
terminate at the occurrence of any such event.
E. Results of Termination
Provisions of confidentiality in Section IX and any other right or
obligation incurred by a party that matured prior to termination of this
AGREEMENT shall survive termination.
12
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V. OPTION AND LICENSING CONSIDERATION
A. Option Fee
In consideration of the option granted herein, CYTOGEN shall pay to
SKI upon execution of this AGREEMENT, an option fee of [Information omitted
and filed separately with the Commission under Rule 24b-2.] This option fee
shall be nonrefundable and may not be credited toward the payment of any
royalties or other consideration required by this AGREEMENT.
B. License Issue Fee
In partial consideration of the license to be granted herein, the
costs incurred and services rendered by SKI, CYTOGEN shall, upon exercise
of the option granted by this AGREEMENT, pay to SKI a license issue fee of
[Information omitted and filed separately with the Commission under Rule
24b-2.] The license issue fee shall be nonrefundable and may not be
credited toward the payment of any royalties or other consideration
required by this AGREEMENT.
C. Prior Patent Expenses
In partial consideration of the license to be granted herein, the
costs incurred and services rendered by SKI, CYTOGEN shall, within thirty
(30) days of signing this AGREEMENT, pay to SKI the reasonable actual
patent expenses incurred by SKI relating to LICENSED PATENT(S) prior to the
EFFECTIVE DATE of this AGREEMENT, [Information omitted and filed separately
with the Commission under Rule 24b-2.]
VI. ROYALTIES
A. Earned Royalties
In consideration for the license granted in this AGREEMENT, CYTOGEN or
its SUBLICENSEES shall pay to SKI, in the manner designated below, [
Information omitted and filed separately with the Commission under Rule
24b-2.
]
13
<PAGE>
B. Minimum Royalties
1. CYTOGEN shall pay to SKI minimum royalties, for as long as this
AGREEMENT is in effect, according to the following schedule:
a. Annual Payments Before Commercial Sales Begin: Starting July 1,
---------------------------------------------
1996, and ending with the end of the first full year in which there
are NET SALES of LICENSED PRODUCTS, Cytogen shall pay SKI [
Information omitted and filed separately with the Commission under
Rule 24b-2.
]
b. Annual Payments After Commercial Sales Begin: Beginning the first
---------------------------------------------
day of the year following the date of the first NET SALES of LICENSED
PRODUCTS, Cytogen shall pay [ Information omitted and filed
separately with the Commission under Rule 24b-2.
]
c. Earned Royalty payments due from SUBLICENSEES shall be paid to SKI
in conjunction with CYTOGEN's earned royalty payments. Such payments
shall be accompanied by written reports, as required with CYTOGEN's
Earned Royalty payments, sufficient to allow SKI to audit the NET
SALES of each SUBLICENSEE.
C. Single Royalty Per Licensed Product
No provision of this AGREEMENT shall be construed as requiring the
payment of more than a single royalty for each NET SALE of a LICENSED
14
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PRODUCT regardless of the number of patentable or patented claims or amount
of information incorporated into the LICENSED PRODUCT.
VII. PAYMENTS AND REPORTS
A. Payments
1. Any amount due SKI as the result of each NET SALE of LICENSED PRODUCT
shall accrue at the time such NET SALES occur.
2. Unless otherwise specified in this AGREEMENT, all payment amounts due
SKI under this AGREEMENT shall be paid within sixty (60) days following the
end of the quarter in which such payment accrues or CYTOGEN otherwise
incurs the obligation to pay such amounts.
3. All such payments shall be identified as "Payment Under Contract
SK#786" and be remitted to the following address:
Office of Industrial Affairs
Sloan Kettering Institute for Cancer Research
1275 York Avenue
New York, NY 10021
B. Interest
1. CYTOGEN shall pay to SKI interest on any amounts not paid when due.
Such interest will accrue from the fifteenth (15th) day after the payment
was due at a rate two percent (2%) above the daily prime interest rate, as
determined by The Bank of New York in New York or its successor entity, on
each day the payment is delinquent, and the interest payment will be due
and payable on the first day of each month after interest begins to accrue,
until full payment of all amounts due SKI is made.
15
<PAGE>
2. SKI's rights to receive such interest payments shall be in addition to
any other rights and remedies available to SKI.
3. If the interest rate required in this Subsection exceeds the legal rate
in a jurisdiction where a claim for such interest is being asserted, the
required interest rate shall be reduced, for such claim only, to the
maximum interest rate allowable in the jurisdiction.
C. Payments in U.S. Dollars
1. Unless otherwise approved or reasonably directed in writing by SKI, all
payments made by CYTOGEN or a SUBLICENSEE to SKI shall be made in United
States Dollars. Should any deduction or credit be taken under laws of the
country to which such payments are subject, SKI shall be given official
government receipts evidencing all such deductions or credits.
2. With respect to NET SALES made by CYTOGEN or a SUBLICENSEE in currency
other than United States dollars, calculations required to ascertain
amounts due SKI shall be in local currency and any currency conversions
necessary to make payment of amounts due SKI shall be made using the United
States dollar buying price quoted for such conversion into United States
dollars in the Wall Street Journal, on the day transfer of funds is
actually made.
3. If CYTOGEN is unable to convert currency received for NET SALES into
United States dollars because of the laws, regulations or fiscal policy of
the country in which the NET SALES are received, or CYTOGEN is unable to
transmit, to the United States, payments due SKI on NET SALES in foreign
countries, CYTOGEN shall notify SKI in writing and shall make such payments
to SKI in the manner SKI directs; provided SKI's directions are reasonable
and lawful.
4. Foreign taxes, including transfer, remittance, patent or stamp taxes,
lawfully charged by a foreign governmental agency, which are actually
paid by CYTOGEN
16
<PAGE>
on NET SALES, collectible within such agency's jurisdiction, shall be
deducted from amounts due SKI on such NET SALES. CYTOGEN shall give SKI
official receipt showing payment of all deducted amounts.
D. Reports
1. CYTOGEN shall keep, at its own expense, accurate books of account,
using its standard accounting procedures, detailing all data necessary to
calculate and reasonably audit any payments due SKI from CYTOGEN under this
AGREEMENT.
2. Each payment made to SKI shall be accompanied by a written report
summarizing, with sufficient detail to allow SKI to verify all payment
amounts, the data used to calculate the amounts paid. Each report
pertaining to royalty payments for the applicable accounting period shall
specifically include the following, as applicable:
(a) Royalties due, broken down by category, including Earned Royalty
and minimum royalty categories.
(b) Minimum royalty amounts credited against earned royalty amounts.
(c) NET SALES broken down by TERRITORY or country.
3. Upon written request by SKI, such books of account shall be made
available for audit at a reasonable time at CYTOGEN's place of business by
an independent auditor of SKI's choice and reasonably acceptable to
CYTOGEN, for the purpose of verifying the payment amounts due. No more than
one such audit shall be made in one calendar year.
4. SKI shall pay all fees and expenses of the agent performing the audit.
Upon written request by SKI, CYTOGEN shall provide an authorized employee,
paid by CYTOGEN, to assist in the audit process, and CYTOGEN shall
cooperate in making the audit process as easy, inexpensive, and accurate as
reasonably possible.
17
<PAGE>
5. If an audit shows that CYTOGEN has paid more than required under this
AGREEMENT, any excess amounts shall, at CYTOGEN's option, be promptly
refunded or credited against future royalties. If an audit shows that
CYTOGEN has paid less than required under this AGREEMENT, CYTOGEN shall
promptly pay the additional amount due together with interest as required
under this AGREEMENT for late payments. If the amount of underpayment
exceeds ten percent (10%) of the amount which should have been paid,
CYTOGEN shall also pay the reasonable expense of the audit.
VIII. PERFORMANCE
A. Gene Technology
1. With regard to LICENSED PRODUCTS based upon or incorporating GENE
TECHNOLOGY, CYTOGEN shall use reasonable due diligence to develop LICENSED
PRODUCTS of reasonable commercial value incorporating GENE TECHNOLOGY. In
the development of such LICENSED PRODUCTS, CYTOGEN shall utilize reasonable
scientific and business standards consistent with the same priority as
other products originating within CYTOGEN with similar scientific
feasibility and market potential. Within one year following the EFFECTIVE
DATE, CYTOGEN shall provide SKI with a written plan concerning such
development efforts and on the second and third anniversary of the
EFFECTIVE DATE shall report progress in carrying out that plan to SKI. If
CYTOGEN elects not to, or fails to, comply with that plan, as may be
modified from time to time based on technical and scientific factors or
market potential considerations, the parties agree to collaborate to the
extent necessary for CYTOGEN to sublicense third parties to develop a
LICENSED PRODUCT utilizing GENE TECHNOLOGY.
2. SKI wishes to have GENE TECHNOLOGY developed as quickly as reasonable.
Toward this end, CYTOGEN shall consider requests from third parties to
sublicense GENE TECHNOLOGY. In the event that subsequent to the first
anniversary of the EFFECTIVE DATE, a qualified third party is willing and
can
18
<PAGE>
reasonably be expected to be successful in developing GENE TECHNOLOGY,
CYTOGEN may implement a comparable development program in a timely manner,
or shall sublicense the third party so that it may develop the LICENSED
PRODUCT, or shall sublicense back to SKI its rights in GENE TECHNOLOGY to
the extent necessary for SKI to sublicense third parties to develop
LICENSED PRODUCT utilizing GENE TECHNOLOGY.
B. Other Technology
With regard to LICENSED PRODUCTS that are not based upon or
incorporating GENE TECHNOLOGY, performance requirements are satisfied by
the payments provided for in Sections V and VI.
IX. CONFIDENTIAL INFORMATION RESTRICTIONS
A. Protection Requirements
The parties acknowledge that either may be required to disclose to the
other information which is CONFIDENTIAL INFORMATION considered to be its
own intellectual property. The parties agree to take reasonable
precautions to protect such CONFIDENTIAL INFORMATION and preserve its
confidential, proprietary, or trade secret status. The parties shall use at
least the same degree of care and precaution as is customarily used to
protect their own CONFIDENTIAL INFORMATION.
X. PATENT MAINTENANCE AND MARKINGS
A. Patent Filing, Prosecution, and Maintenance
1. Filing, prosecution and maintenance of all LICENSED PATENT(S) shall be
the responsibility of SKI, but shall be at the discretion and expense of
CYTOGEN. In the event that CYTOGEN decides not to file, prosecute or
maintain any part of the LICENSED PATENT(S), SKI may do so at its own
expense. CYTOGEN commits to filing LICENSED PATENTS of commercial
significance in the United States, Canada, Japan and under the European
Patent Convention.
19
<PAGE>
2. Within thirty (30) days of receiving notice from SKI stating patent
maintenance fees or costs related to the LICENSED PATENT(S) have been paid,
or within thirty (30) days of receiving an invoice for patent maintenance
fees or costs from SKI's PATENT COUNSEL, CYTOGEN shall reimburse SKI, or
SKI's PATENT COUNSEL, as the case may be, for all such fees and costs.
B. Patent Counsel
CYTOGEN and SKI agree to give notice according to the notification
provisions of this AGREEMENT, of any change from PATENT COUNSEL below:
For CYTOGEN: For SKI:
Pennie & Edmunds Cooper & Dunham
1155 Avenue of the Americas 30 Rockefeller Plaza
New York, New York 10036 New York, New York 10112
Attn: S. Leslie Misrock, Esq. Attn: John P. White, Esq.
C. Cooperation Between the Parties
Upon written request by CYTOGEN, SKI shall provide CYTOGEN with access
to all patent applications listed in Schedule B, and all future-filed
patent applications and all correspondence with the United States Patent
and Trademark Office or corresponding office in foreign countries
applicable thereto. The parties agree to mutually cooperate to obtain
optimal patent protection available. If SKI chooses not to prosecute
and/or maintain certain patent applications/patents under this Agreement,
SKI shall so notify CYTOGEN in writing and CYTOGEN shall, in its sole
discretion, decide whether to assume the responsibility and expenses
therefor for each such patent application or patent. In that event, the
patent applications/patents for which CYTOGEN shall assume responsibility
shall be assigned to CYTOGEN.
20
<PAGE>
D. Patent Markings
CYTOGEN shall place in a conspicuous location on any LICENSED PRODUCTS
covered by LICENSED PATENT(S) listed in Exhibit B, a patent notice in
accordance with 35 U.S.C. (S)287, or the patent law of the country where
the patent issues. CYTOGEN agrees to mark any products made using a process
covered by any LICENSED PATENT(S) listed in Exhibit B with the number of
each such patent and, with respect to LICENSED PATENT(S), to respond to any
request for disclosure under 35 U.S.C. (S)287(b)(4)(B) by only notifying
SKI of the request for disclosure.
XI. WARRANTIES
A. Warranties, Rights, and Liabilities
1. SKI MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES, EXPRESS OR
IMPLIED, OTHER THAN IN ARTICLE 1, PARAGRAPH C ABOVE AND SUBPARAGRAPH 3 HERE
BELOW, AND ASSUMES NO LIABILITIES OR RESPONSIBILITIES WITH RESPECT TO THE
USE, SALE, OR OTHER DISPOSITION BY CYTOGEN, ANY AFFILIATES, SUBLICENSEES,
VENDEES, OR TRANSFEREES, OF LICENSED PRODUCT(S) OR THE LICENSED PATENT(S).
2. SKI'S OFFICERS, DIRECTORS, AND EMPLOYEES, SHALL NOT ASSUME ANY
LIABILITY RESULTING FROM ANY EXERCISE OF RIGHTS GRANTED UNDER THIS
AGREEMENT.
3. SKI SPECIFICALLY DOES NOT MAKE ANY WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, CONCERNING THE PATENTABILITY OF ANY LICENSED PATENT(S),
THE VALIDITY OF ANY LICENSED PATENT(S), THE SCOPE OF ANY LICENSED PATENT(S)
CLAIMS, OR WHETHER OR NOT THE EXERCISE OF THE RIGHTS LICENSED UNDER THIS
AGREEMENT WILL OR WILL NOT RESULT IN INFRINGEMENT OF ANY PATENT(S),
PROVIDED HOWEVER, AND NOT
21
<PAGE>
WITHSTANDING THE FOREGOING, SKI DOES WARRANT AND REPRESENT THAT IT HAS NO
KNOWLEDGE OF ANY FAILURE TO COMPLY WITH 37 CFR 1.56.
XII. INFRINGEMENT
A. Obligation to Notify
Should either party become aware of any infringement or potential
infringement of the LICENSED PATENT(S), such party shall give prompt
written notice to the other party detailing as many facts as possible
concerning such infringement or potential infringement.
B. Infringement by SKI/CYTOGEN.
1. If, as a result of the manufacture, use or sale of LICENSED PRODUCTS,
SKI, or CYTOGEN is sued for patent infringement or threatened with such
lawsuit or other action by a third party, SKI or CYTOGEN, as the case may
be shall promptly notify the other party of such suit. CYTOGEN shall have
the right, at its discretion either:
a. to stop manufacture, use and sale of the subject LICENSED
PRODUCT(S) and to stop all payments thereafter due under this
Agreement; or
b. to actively consult with SKI in its attempts to resolve the same
following evaluation of opinion by CYTOGEN'S legal counsel and the
judgement of CYTOGEN as to the optimal and reasonable course of action
to be taken in the circumstances; or
c. stand suit.
2. Should CYTOGEN be sued by a third party for the reasons set forth
above and elect to stand suit therefor, CYTOGEN shall select defense
counsel, conduct the
22
<PAGE>
litigation including settlement; and shall bear [ Information omitted
and filed separately with the Commission under Rule 24b-2.
] SKI shall cooperate fully with CYTOGEN in the conduct of such
suit and may, if it so desires, retain independent counsel at its own
expense to represent its own interest. CYTOGEN and SKI shall consult with
each other during such suit but final determination and course or conduct,
including settlement, shall remain the responsibility of CYTOGEN.
C. Infringement by Third Parties
1. Suit by CYTOGEN. Either party shall promptly notify the other party of
any infringement of any LICENSED PATENTS, and SKI shall notify CYTOGEN of
the declaration of an interference relating to LICENSED PATENTS. Each
party shall provide the other party with all available evidence relating
thereto. CYTOGEN and SKI shall then consult with each other as to the best
manner in which to proceed. CYTOGEN shall have the right, but not the
obligation, to bring, defend and maintain any appropriate suit or action.
If CYTOGEN requests SKI to join CYTOGEN in such suit or action and SKI
agrees to do so, SKI shall execute all papers and perform such other acts
as may be reasonably required and may, at its option and at its expense, be
represented by counsel of its choice. Should CYTOGEN lack standing to bring
any such action, then CYTOGEN may cause SKI to do so upon first undertaking
to indemnify and hold SKI harmless (to the extent permissible by law) from
all consequent liability and to promptly reimburse SKI for all reasonable
Costs (as defined hereinafter stemming therefrom). Absent an agreement
between the parties to jointly bring any action or suit hereunder and to
share the expense thereof, any amount recovered in any such action or suit
shall be retained by the party bringing the suit and bearing its expenses.
23
<PAGE>
2. Suit by SKI. In the event CYTOGEN fails to take action with respect to
the matters provided for in Paragraph (a) hereinafter, within a reasonable
period of time, but not more than three (3) months following receipt of
such notice and evidence, SKI shall have the right, but not the obligation,
to bring, defend and maintain any appropriate suit or action. If SKI finds
it necessary to join CYTOGEN in such suit or action, CYTOGEN shall execute
all papers and perform such other acts as may be reasonably required and
may, at its option and expense, be represented by counsel of its choice. In
the event SKI does join CYTOGEN in such suit or action. SKI shall indemnify
and hold CYTOGEN harmless (to the extent permissible by law) from all
consequent liability and to promptly reimburse CYTOGEN for all reasonable
Costs (as defined in hereinabove). Absent an agreement between the parties
to jointly bring any action or suit hereunder and to share the expenses
thereof, any amount recovered in any such action or suit shall be retained
by the party bringing the suit and bearing its expenses.
D. Judgement.
In the event of a judgement in any suit requiring CYTOGEN to pay a
royalty to a third party, or in the event of a settlement of such suit
requiring royalty payments to be made, [ Information omitted and filed
separately with the Commission under Rule 24b-2.
]
XIII. GENERAL PROVISIONS
A. Assignment
Without prior written approval from SKI's authorized
representative,which SKI agrees shall not be unreasonably withheld, this
AGREEMENT or the option granted by this AGREEMENT may not be assigned or
transferred by CYTOGEN, except to the successor or assignee of all or
substantially all of CYTOGEN's business interest relating to the LICENSED
PATENT(S). In the event that all or substantially all of CYTOGEN's business
interest relating to the LICENSED
24
<PAGE>
PATENT(S) is assigned or transferred, CYTOGEN shall notify SKI prior to
such assignment or transfer.
B. Entire Agreement
1. This AGREEMENT constitutes the entire agreement and understanding
between SKI and CYTOGEN with respect to the LICENSED PATENT(S) and LICENSED
TECHNOLOGY, and any modification of this AGREEMENT shall be in writing and
shall be signed by a duly authorized representative of both SKI and
CYTOGEN. There are no understandings, representations, or warranties
between SKI and CYTOGEN concerning the LICENSED PATENT(S) and LICENSED
TECHNOLOGY except as expressly set forth in this AGREEMENT.
2. With the exception of any confidential disclosure, nondisclosure,
secrecy or similar agreement(s) between SKI and CYTOGEN concerning the
LICENSED PATENT(S)and LICENSED TECHNOLOGY, this AGREEMENT supersedes all
prior agreements or understandings, whether written or oral, between SKI
and CYTOGEN concerning the LICENSED PATENT(S)and LICENSED TECHNOLOGY.
Should any provision(s) of such confidential disclosure, nondisclosure,
secrecy, or similar agreement(s) be contradictory to terms of this
AGREEMENT, the terms of this AGREEMENT shall supersede and be controlling.
C. Export Control
This AGREEMENT may be subject to certain UNITED STATES laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes, and all other export controlled commodities.
CYTOGEN shall comply with applicable laws and regulations. By granting
rights in this AGREEMENT, SKI does not represent that export authorization
or an export license will not be necessary or, if necessary, that such
authorization or export license will be granted.
25
<PAGE>
D. Force Majeure
Neither SKI nor CYTOGEN shall be in default of the terms of this
AGREEMENT because the party delays performance or fails to perform such
terms; provided such delay or failure is not the result of the party's
intentional or grossly negligent acts or omissions, but the result of
causes beyond the reasonable control of such party. Causes reasonably
beyond the control of SKI and CYTOGEN shall include, but not be limited to,
revolutions; civil disobedience; fires; damage or destruction of facilities
or equipment; acts of God, war, or public enemies; blockades; embargoes;
strikes; labor disputes; laws; governmental, administrative or judicial
orders, proclamations, regulations, including but not limited to time for
governmentapprovals relating to LICENSED PRODUCTS, ordinances, demands, or
requirements; delays in transit or deliveries; or inability to secure
necessary permits, permissions, raw materials, or equipment.
E. Governing Law
1. This AGREEMENT shall be deemed to have been made in New York and shall
be governed and construed in accordance with the laws of the state of New
York.
2. All proceedings and matters affecting the validity, construction, or
effect of
the LICENSED PATENT(s) shall be determined in accordance with the laws of
the country which granted the subject LICENSED PATENT(s).
F. Headings
The section and subsection titles and headings contained in this
AGREEMENT are for convenience and reference only. Such titles and headings
do not form a part of this AGREEMENT, shall not define or limit the scope
of the sections or subsections, and shall not affect the construction or
interpretation of any of the sections or subsections.
26
<PAGE>
G. Independence of the Parties
SKI and CYTOGEN are independent entities engaged in independent
business, and neither party nor any agent or employee of either party shall
be regarded as an agent or employee of the other. Nothing herein shall be
construed as reserving to either party the right to control the other in
the conduct of its employees or business, nor shall either party have the
authority to make any promise, guarantee, warranty, or representation which
will create any obligation or liability whatsoever, whether express or
implied, on behalf of the other. SKI and CYTOGEN are not joint venturers
or partners in any sense.
H. Notices
All notices, reports, payments, requests, consents, demands and other
communications between SKI and CYTOGEN, pertaining to subjects related to
this AGREEMENT, shall be in writing and shall be deemed duly given and
effective (A) when actually received by mail or personal delivery, or (B)
three days after being mailed by prepaid registered or certified mail, to
the receiving party to the address as set forth below, or to such other
address as may be later designated by written notice from either party to
the other party:
SKI's Notification Address: CYTOGEN's Notification Address:
James S. Quirk, Senior Vice William Ryan, Vice President &
President General Counsel
Research Resources Management Cytogen Corporation
Sloan-Kettering Institute for 600 College Road East
Cancer Princeton, NJ 08540-5308
Research and
1275 York Avenue John D. Rodwell, Ph.D.
New York, NY 10021 Vice President, Research and
Development
(same address)
27
<PAGE>
I. Modifications
Either SKI or CYTOGEN may propose a modification to this AGREEMENT.
The proposing party shall give the other party notice which sets forth the
proposed modification. Within thirty (30) days following the effective date
of such notice, the other party shall accept the modification or reject the
modification proposed. SKI and CYTOGEN agree to work in good faith to
modify this AGREEMENT should modification be required to meet the needs of
either party.
J. Use of Name
CYTOGEN shall not, without prior written consent from SKI in each
specific case, use SKI's name, trademark(s), or any adaptations thereof.
K. Waiver of Rights
In order to be effective, any waiver, by either party, of any right
under this AGREEMENT, must be in writing signed by an authorized
representative of the party making the waiver. No such waiver or failure
of SKI or CYTOGEN to enforce a right or strict performance under this
AGREEMENT shall be deemed to be a waiver or forbearance which would in any
way prevent SKI or CYTOGEN from subsequently asserting or exercising any
such rights, making a claim not specifically waived, or requiring strict
performance of this AGREEMENT. No such waiver or failure to enforce shall
affect the validity of this AGREEMENT or be a continuing waiver excusing
compliance with any provision of this AGREEMENT in the future.
28
<PAGE>
L. Signatures
IN WITNESS WHEREOF, SKI and CYTOGEN have caused this AGREEMENT to be
executed in duplicate originals by their duly authorized representative.
Sloan-Kettering Institute for Cytogen Corporation
Cancer Research
By: /s/ James S. Quirk By: /s/ William J. Ryan
------------------------------- -------------------------------
Signature Signature
James S. Quirk William J. Ryan
Senior Vice President Vice President
Research Resources Management
Date: August 19 , 1993 Date: August 19 , 1993
----------- -----------
29
<PAGE>
EXHIBIT B
Of the Option and License Agreement Between
Sloan-Kettering Institute for Cancer Research and
Cytogen Corporation
LICENSED PATENTS
U. S. Patents/Applications
==========================
Israeli, et al., U.S.S.N. 973,337, filed November 5, 1992, titled "Prostate-
Specific Membrane Antigen".
<PAGE>
Exhibit 10.38
DESCRIPTION OF ARRANGEMENT WITH
SOMERSET CENTRAL CORPORATION
T. Jerome Madison is Vice President, Chief Financial Officer, Secretary and
a Director of the Company. Mr. Madison's services are provided to the
Company under an oral agreement between the Company and Somerset Central
Corporation, a New Jersey corporation, of which Mr. Madison is the sole
stockholder, director and officer. The arrangement calls for monthly
payments of $13,750 plus out-of-pocket expenses. For the year ended
December 31, 1994, the Company recorded approximately $180,000 for services
rendered under the agreement.
<PAGE>
Exhibit 21
Subsidiaries of Cytogen Corporation
CytoRad Acquisition Corp., a Delaware corporation, is a wholly-owned
subsidiary of Cytogen Corporation.
Cytogen UK Limited, a private limited company organized under the laws of
the United Kingdom, is a wholly-owned subsidiary of Cytogen Corporation.
<PAGE>
Exhibit 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CYTOGEN CORPORATION:
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously
filed Form S-8 Registration Statement (File No. 33-30595), filed with the
Securities and Exchange Commission on August 18, 1989, Form S-3
Registration Statement (File No. 33-35140), filed with the Securities and
Exchange Commission on May 31, 1990, Form S-8 Registration Statement (File
No. 33-52574), filed with the Securities and Exchange Commission on
September 29, 1992, Form S-8 Registration Statement (File No. 33-57004),
filed with the Securities and Exchange Commission on January 12, 1993 and
Form S-3 Registration Statement (File No. 33-77396) filed with the
Securities and Exchange Commission on April 6, 1994.
Philadelphia, PA
March 16, 1995
ARTHUR ANDERSEN LLP
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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