<PAGE>
SECURITIES AND EXCHANGE COMMISSION Conformed
Washington, D.C. 20549 Copy
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 1996
--------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from ______________ to ______________
Commission file number 0-14879
---------
Cytogen Corporation
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(Exact name of Registrant as specified in its charter)
Delaware 22-2322400
- ------------------------------- ---------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 College Road East, CN 5308, Princeton, NJ 08540-5308
----------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (609) 987-8200
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class Outstanding at April 24, 1996
- ---------------------------- -------------------------------
Common Stock, $.01 par value 47,865,288
Warrants to Purchase One Share of Common Stock, 4,023,295
$.01 par value
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
March 31, 1996
PART I - FINANCIAL INFORMATION
- ------ ---------------------
Item 1 - Consolidated Financial Statements
INTRODUCTORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------
The accompanying consolidated financial statements have been prepared by
the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosure
normally included in annual consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations. It is suggested that these
condensed consolidated financial statements be read in conjunction with CYTOGEN
Corporation's (the "Company" or "CYTOGEN") audited consolidated financial
statements and notes thereto for the year ended December 31, 1995. In the
opinion of the Registrant, these consolidated financial statements contain all
adjustments necessary to present fairly the financial position of CYTOGEN as of
March 31, 1996, the results of operations for the three months ended March 31,
1996 and 1995, and the cash flows for the three months ended March 31, 1996 and
1995.
The results of operations for the periods ended March 31, 1996 are not
necessarily indicative of the operating results for the full year.
2
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
(Unaudited)
-------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 22,113 $ 27,551
Short term investments 5,104 1,201
Restricted cash 383 383
Accounts receivable, net 454 284
Inventories 317 356
Other current assets 250 360
-------------- --------------
Total current assets 28,621 30,135
-------------- --------------
Property and Equipment:
Leasehold improvements 9,881 9,850
Equipment and furniture 6,622 6,535
-------------- --------------
16,503 16,385
Less- Accumulated depreciation and amortization (11,346) (10,923)
-------------- --------------
Net property and equipment 5,157 5,462
-------------- --------------
Other Assets 1,550 1,552
-------------- --------------
$ 35,328 $ 37,149
============== ==============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities $ 4,763 $ 6,385
Current portion of long term liabilities 2,010 2,213
-------------- --------------
Total current liabilities 6,773 8,598
-------------- --------------
Long Term Liabilities 3,345 3,275
-------------- --------------
Stockholders' Equity:
Preferred stock, $.01 par value, 5,400,000 shares
authorized - none issued - -
Common stock, $.01 par value, 69,600,000 shares
authorized, 47,252,000 and 46,040,000 shares
issued and outstanding in 1996 and 1995, respectively 473 460
Additional paid-in capital 258,868 253,122
Unrealized gains on short term investments 9 34
Accumulated deficit (234,140) (228,340)
-------------- --------------
Total stockholders' equity 25,210 25,276
-------------- --------------
$ 35,328 $ 37,149
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1995
=============================
<S> <C> <C>
REVENUES:
Product related $ 383 $ 374
License and contract 815 334
---------- ---------
Total Revenues 1,198 708
---------- ---------
OPERATING EXPENSES:
Research and development 4,936 5,496
Selling and marketing 727 942
Acquisition of technology and marketing rights - 19,663
General and administrative 1,601 1,628
---------- ---------
Total Operating Expenses 7,264 27,729
---------- ---------
LOSS FROM OPERATIONS $ (6,066) $ (27,021)
---------- ---------
GAINS ON INVESTMENTS, net 380 163
INTEREST EXPENSE (114) (148)
---------- ---------
NET LOSS $ (5,800) $ (27,006)
========== =========
NET LOSS PER COMMON SHARE $ (0.12) $ (0.95)
========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 46,899 28,512
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1996 1995
==================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,800) $ (27,006)
-------------- --------------
Adjustments to Reconcile Net Loss to Cash Used for
Operating Activities:
Depreciation and Amortization 423 367
Imputed Interest 103 148
Amortization of Deferred Charges (8) (10)
Acquisition of Technology Rights - 19,663
Inventory Writedown - 698
Stock Grants - 30
Changes in Assets and Liabilities, Net of Effect
from Acquisition:
Accounts receivable, net (170) -
Inventories 39 72
Other current assets 110 110
Accounts payable and accrued liabilities (1,622) (971)
Other liabilities (226) 674
-------------- --------------
Total adjustments (1,351) 20,781
-------------- --------------
Net cash used for operating activities (7,151) (6,225)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in Short Term Investments (3,928) (1,346)
Purchases of Property and Equipment (118) (137)
Net Cash Acquired in CytoRad Acquisition (See Note 6) - 11,260
-------------- --------------
Net cash (used for) provided by investing activities (4,046) 9,777
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock 5,759 4,000
-------------- --------------
Net cash provided by financing activities 5,759 4,000
-------------- --------------
Net (Decrease) Increase in Cash and Cash Equivalents (5,438) 7,552
Cash and Cash Equivalents, Beginning of Period 27,551 7,700
-------------- --------------
Cash and Cash Equivalents, End of Period $ 22,113 $ 15,252
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
From time to time, the term "Company" as used herein, may include CYTOGEN and
its wholly-owned subsidiary Cellcor, Inc. ("Cellcor") taken as a whole, where
appropriate.
(Information as of March 31, 1996 and for the three months ended March 31, 1996
and 1995 is unaudited.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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
Management determines the appropriate classification of debt and equity
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. At March 31, 1996, the Company's short term investments are
classified as available for sale and are carried at fair value based on quoted
market prices. Differences between an investment's amortized cost and fair value
are charged directly to stockholders' equity, net of income taxes. Accordingly,
a net unrealized gain of approximately $9,000 has been recorded as a separate
component of stockholders' equity at March 31, 1996.
Restricted Cash
The Company has entered into equipment lease financing arrangements that
require the issuance of letters of credit that are secured by certain cash and
cash equivalents. The aggregate amount of these cash and cash equivalents
totaled $383,000 and are segregated and classified as restricted cash in the
accompanying consolidated balance sheets.
6
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Other Assets
Other assets consist primarily of undeveloped real property with a net
book value of $1.3 million, which is valued at the lower of cost or market (see
Note 9).
Revenue Recognition
Product related revenues include product sales by CYTOGEN to its
customers and in 1996, to its European distributor, CIS biointernational
("CISbio") (see Note 2). Product sales are recognized upon shipment of finished
goods. Beginning in October 1995, as a result of CYTOGEN's acquisition of
Cellcor (see Note 4), product related revenues also include the recovery of
costs associated with the treatment of patients who have received the
autolymphocyte therapy ("ALT") for metastatic renal cell carcinoma ("mRCC")
under a compassionate protocol and in 1996, also included the cost recovery
associated with the Treatment IND program.
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.
Common Stock Outstanding
As a result of the Cellcor merger, the issued and outstanding shares of
Cellcor common stock and preferred stock ("Cellcor Shares") were converted into
the right to receive shares of CYTOGEN common stock. As of March 31, 1996,
certain holders of Cellcor Shares had not yet exchanged their Cellcor Shares for
shares of CYTOGEN common stock. For accounting purposes, all Cellcor Shares were
deemed exchanged for issued and outstanding shares of CYTOGEN common stock as of
the date of the Cellcor merger. See Note 4.
New Accounting Pronouncements
The Company will be required to adopt the disclosure requirement of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," for the year ended December 31, 1996. The adoption of this
pronouncement will have no impact on the Company's statement of operations.
Reclassifications
Certain reclassifications have been reflected in the 1995 financial
statements to conform with the 1996 presentation.
2. CIS BIOINTERNATIONAL AND FAULDING:
In January 1996, CYTOGEN entered into a distribution agreement (the
"CISbio Agreement") with CISbio, granting to CISbio the exclusive right to
distribute and sell OncoScint CR/OV in all the countries of the world, except
for the U.S. and Canada. CISbio has advised CYTOGEN that it expects to re-launch
OncoScint CR/OV during 1996 in eight Western European and four Eastern European
countries where the product has been approved for
7
<PAGE>
marketing. The CISbio Agreement provides for payments upon execution of the
agreement and upon achievement of a certain milestone, payments for minimum
annual purchases of the components of OncoScint CR/OV by CISbio, and certain
royalties based upon net sales, if any, of OncoScint CR/OV by CISbio. For the
three months ended March 31, 1996, CYTOGEN recorded $144,000 in license and
product related revenues from CISbio.
In December 1995, CYTOGEN entered into a distribution agreement (the
"Faulding Agreement") with Faulding (Canada) Inc. ("Faulding") granting to
Faulding the exclusive right to distribute and sell OncoScint CR/OV in Canada.
Faulding is currently pursuing the necessary regulatory approvals to market the
product in Canada. In addition to a one-time, up-front cash payment for
execution of the agreement, which amount was recognized by the Company in 1996,
Faulding will be required to make additional payments upon achievement of
certain milestones, payments for minimum annual purchases of OncoScint CR/OV by
Faulding, and certain royalties based upon net sales, if any, of OncoScint CR/OV
by Faulding.
3. ELAN CORPORATION:
In December 1995, CYTOGEN entered into a research and development and
option agreement (the "Elan Agreement") with Elan Corporation, plc ("Elan")
under which both parties will implement a research program that combines
CYTOGEN's Genetic Diversity Library ("GDL") technology with Elan's drug delivery
system technology to collaboratively develop orally administered products.
Thereunder, Elan has been granted an option for the exclusive worldwide
licensing rights to any products so developed and the Company will receive
royalties based on sales, if any, of such products. Elan will provide the
funding necessary for the Company to fulfill its obligations under the research
program with aggregate payments for work performed by CYTOGEN not to exceed $1.5
million during the first sixteen months of the research program. For the three
months ended March 31, 1996, CYTOGEN recorded $156,000 in contract revenues from
Elan.
4. CELLCOR, INC.:
Pursuant to an Agreement and Plan of Merger dated June 15, 1995, as
amended, in October 1995, CYTOGEN completed its acquisition of Cellcor and the
related subscription offering (the "Subscription Offering"). As a result,
CYTOGEN issued (i) 4,713,564 shares of CYTOGEN common stock to acquire Cellcor
(see Note 1) and (ii) 5,144,388 shares of CYTOGEN common stock in connection
with the Subscription Offering raising a total of $20.0 million, and has
reserved for issuance up to 606,952 shares of CYTOGEN common stock issuable upon
the exercise of the options that were outstanding under the Cellcor employee
stock option plans at the time of merger. The transaction was accounted for by
using the purchase method of accounting, whereby the Company recorded a one-
time, non-cash charge of approximately $26.2 million for acquisition of
technology rights to its statement of operations during the three months ended
December 31, 1995, which charge represented the amount by which the purchase
price exceeded the fair value of net assets acquired from Cellcor.
5. DUPONT MERCK:
Pursuant to a license agreement dated as of December 20, 1994 and as
amended on March 29, 1996 (the "DP/Merck Agreement"), CYTOGEN has sub-licensed
to The DuPont Merck Pharmaceutical Company ("DuPont Merck") CYTOGEN's
manufacturing and marketing rights
8
<PAGE>
to Quadramet in the U.S., Canada and Latin America (the "Territory Rights"), if
and when approved for marketing in each applicable country. CYTOGEN has retained
the right to co-promote the product to nuclear medicine specialists. Quadramet
is a therapy agent for treatment of severe pain associated with cancers that
spread to the bone. CYTOGEN acquired the Territory Rights to Quadramet from The
Dow Chemical Company ("Dow") pursuant to a license agreement, under which it
assumed responsibility for the development and commercialization of the product
(see Note 7). The New Drug Application ("NDA") for Quadramet was officially
filed by FDA in August 1995.
Pursuant to the terms of the DP/Merck Agreement, in January 1995,
CYTOGEN received from DuPont Merck $4.0 million for the sale of 908,265 shares
of CYTOGEN common stock to DuPont Merck and $1.3 million to fund additional
clinical programs to expand the use and marketing of Quadramet, of which
$333,000 was recognized as license and contract revenues during the three months
ended March 31, 1995. The remaining $1.0 million was classified as deferred
revenues, and was recognized ratably throughout 1995 as services under the
contract were performed. For the three months ended March 31, 1996, CYTOGEN
recorded $431,000 as license and contract revenues from DuPont Merck. The
DP/Merck Agreement further provides for future payments of up to $2.5 million
toward additional clinical programs, a $2.0 million milestone payment if and
when Quadramet receives FDA approval, additional payments upon achievement of
certain other milestones and royalty payments based on sales, including
guaranteed minimum payments.
6. CYTORAD INCORPORATED:
In February 1995, CYTOGEN completed its acquisition of CytoRad
Incorporated ("CytoRad") pursuant to an Agreement and Plan of Merger dated
November 15, 1994, under which CYTOGEN exchanged for each outstanding CytoRad
unit (i) 1.5 shares of CYTOGEN common stock, (ii) a warrant to acquire one share
of CYTOGEN common stock for $8.00 that expires January 31, 1997 and (iii) a
contingent value right ("CVR") to receive, under certain circumstances and at no
additional cost, up to one-half share of CYTOGEN common stock. On February 29,
1996, the Company announced that the CVRs had expired by their terms and were of
no further value. Accordingly, the Company no longer has an obligation to issue
shares of its common stock to holders of CVRs on January 31, 1997.
As a result of the merger, the Company acquired $11.7 million of
CytoRad's cash and securities, before payment of certain transaction costs. In
addition, CYTOGEN recorded approximately $19.7 million for acquisition of
technology and marketing rights as a charge to its statement of operations
during the three months ended March 31, 1995, which charge represented the
amount by which the purchase price exceeded the fair value of net assets
acquired from CytoRad.
7. THE DOW CHEMICAL COMPANY:
In 1993, CYTOGEN acquired from Dow an exclusive license in the U.S. for
Quadramet. This license was amended in 1995 to expand the territory to include
Canada and Latin America. The Company will be required to pay to Dow $4.0
million if and when Quadramet 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.
9
<PAGE>
8. 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>
Three Months Ended March 31,
------------------------------
1996 1995
-------- --------
<S> <C> <C>
Customer
----------
DuPont Merck (See Note 5) 36% 47%
Medi-Physics 14% -
Elan (See Note 3) 13% -
CISbio (See Note 2) 12% -
Medi-Physics is a chain of radiopharmacies.
</TABLE>
9. LONG TERM LIABILITIES:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Due to Knoll $4,326,000 $4,237,000
Due to Chiron 599,000 785,000
Capital lease obligations 421,000 448,000
Deferred charges 9,000 18,000
---------- ----------
5,355,000 5,488,000
Less: Current portion 2,010,000 2,213,000
---------- ----------
$3,345,000 $3,275,000
========== ==========
</TABLE>
In November 1994, CYTOGEN executed a termination agreement (the
"Termination Agreement") with Knoll Pharmaceutical Company ("Knoll"). Pursuant
to the Termination Agreement, the Company has reacquired from Knoll all U.S.
marketing rights to OncoScint CR/OV (the "U.S. Rights"), which were previously
granted to Knoll. The resulting liability of CYTOGEN to Knoll will be paid over
a four-year period and without interest, as follows: $3.1 million in 1995 (which
amount has been paid); $1.6 million in 1996; $1.6 million in 1997; and $1.7
million in 1998. Imputed interest of $88,000 and $130,000 relating to the
obligation, which was discounted based upon a 10% interest rate, was recorded
for the three months ended March 31, 1996 and 1995, respectively.
In December 1994, the Company entered into a disengagement agreement
(the "Disengagement Agreement") with Chiron B.V., formerly EuroCetus B.V.,
successor in interest to EuroCetus International, N.V. ("Chiron"). Under the
Disengagement Agreement, the Company reacquired the exclusive marketing and
distribution rights in Europe (the "European Rights"), which were previously
granted to Chiron, and purchased certain business assets relating to the
European Rights. The resulting liability of CYTOGEN to Chiron will be paid over
three years and without interest, as follows: $200,000 in 1995 (which amount has
been paid), $300,000 in 1996 and $377,181 in 1997. 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. Imputed interest of $15,000 and $18,000 relating to the obligation,
which was discounted based upon a 10% interest rate, was recorded for the three
months ended March 31, 1996 and 1995, respectively.
10
<PAGE>
10. COMMON STOCK:
Under an option agreement (the "Option") granted to Fletcher Capital
Market, Inc. ("Fletcher") in May 1994, as amended, Fletcher purchased (i) 1.8
million shares of CYTOGEN common stock in August 1995, at an aggregate price of
approximately $7.3 million, or $4.058 per share, (ii) 500,000 shares of CYTOGEN
common stock in November 1995, at an aggregate price of $2.3 million, or $4.696
per share, and (iii) an aggregate of 1.0 million shares of CYTOGEN common stock
in January 1996, at an aggregate price of $4.7 million, or $4.70 per share.
Pursuant to an Investment Agreement between the Company and Fletcher
Fund, L.P., a Delaware limited partnership ("Fletcher Fund"), dated as of
September 8, 1995 (as amended, the "Investment Agreement"), the Company sold
665,352 shares of CYTOGEN common stock, for an aggregate purchase price of
approximately $2.7 million. Under the Investment Agreement, as amended by the
First Amendment to Investment Agreement dated April 26, 1996 (the "Amendment"),
the Company was also granted the right to issue and sell to Fletcher Fund, and
Fletcher Fund will be obligated to purchase, up to 675,000 shares of CYTOGEN
common stock from time to time (collectively, the "Put Rights") at a purchase
price per share equal to 101% of the average of the daily volume weighted
average price of CYTOGEN common stock on the Nasdaq National Market ("NASDAQ")
during (a) a designated twenty-one business day period or (b) the last three
business days of said designated twenty-one business day period, whichever is
less. The Put Rights, which were originally scheduled to expire on March 29,
1996, were extended until December 15, 1996 pursuant to the Amendment. Under
certain circumstances, Fletcher Fund will have the right to decrease or increase
the number of shares of CYTOGEN Common Stock to be purchased in connection with
the exercise of a Put Right by the Company, but in no event shall the total
number of shares sold by the Company and purchased by Fletcher Fund pursuant to
the Investment Agreement exceed 4.9% of the total number of shares of CYTOGEN
common stock outstanding, after giving effect to the proposed sale and purchase
of the shares in question. The shares to be issued and sold in this transaction
were registered pursuant to a registration statement on Form S-3 filed with the
Securities and Exchange Commission ("SEC") in April 1994.
In November 1995, CYTOGEN sold 1,256,565 shares of common stock to a
private institutional investor in a private placement transaction pursuant to
Regulation S of the Securities Act for an aggregate price of $5.0 million. In
April 1996, CYTOGEN sold an additional 729,394 shares of common stock to that
same investor for an aggregate price of $5.0 million, pursuant to the exercise
of the put right that was previously granted to the Company.
CYTOGEN and Nomura Securities International, Inc. ("Nomura") executed an
agreement effective as of February 23, 1996 that terminated the Purchase
Agreement between CYTOGEN and Nomura dated March 28, 1995. No sales of stock
occurred under the terms of the agreement.
See Notes 4, 5 and 6 for information related to the Company's issuance
of common stock in connection with the Cellcor merger, DP/Merck Agreement, and
CytoRad merger.
11
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Background
Historically, CYTOGEN'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 products in the U.S. and Western Europe.
In December 1994, CYTOGEN entered into the DP/Merck Agreement, as
amended in March 1996, with DuPont Merck, pursuant to which DuPont Merck will
have responsibility for manufacturing and marketing Quadramet in the U.S.,
Canada and Latin America, if and when approved for marketing by each applicable
country. The Company has retained the right to co-promote the product to nuclear
medicine specialists. Pursuant to the DP/Merck Agreement, in January 1995,
CYTOGEN received from DuPont Merck $5.3 million, of which $1.3 million was to
fund additional clinical programs to expand the use and marketing of Quadramet
and $4.0 million was to purchase 908,265 shares of CYTOGEN common stock. In
addition, for the three months ended March 31, 1996, CYTOGEN recorded $431,000
in license and contract revenues from DuPont Merck. See Note 5 to the
Consolidated Financial Statements. The NDA for Quadramet was accepted for filing
by FDA effective August 1995. The timing and outcome of FDA's decision regarding
Quadramet cannot be predicted by the Company at this time.
In February 1995, CYTOGEN acquired CytoRad by merging CytoRad with and
into a wholly-owned subsidiary of CYTOGEN. See Note 6 to the Consolidated
Financial Statements. As a result of the merger, the Company acquired $11.7
million of CytoRad's cash and securities, before payment of certain transaction
costs. In addition, during the three months ended March 31, 1995, the Company
recorded a one-time non-cash charge to the statement of operations of $19.7
million for the acquisition of technology and marketing rights pertaining to the
merger.
In December 1995, CYTOGEN entered into the Elan Agreement with Elan
under which both parties will implement a research program that combines
CYTOGEN's GDL technology with Elan's drug delivery system technology to
collaboratively develop orally administered products. See Note 3 to the
Consolidated Financial Statements. Elan will provide the funding necessary for
the Company to fulfill its obligations under the research program with aggregate
payments for work performed by CYTOGEN not to exceed $1.5 million during the
first sixteen months of the research program. For the three months ended March
31, 1996, CYTOGEN recorded $156,000 in contract revenues from Elan.
To date, sales of OncoScint CR/OV in both the U.S. and European markets
have been limited, in part, because OncoScint CR/OV is a "technique-dependent"
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 because of approval by
FDA of repeat administration, which occurred in November 1995, implementation of
better quality control at the time the image is actually acquired, and through
greater assistance with the interpretation of the scans. The approval of repeat
administration extends the prior FDA approval of the single administration
indication to include readministration of OncoScint CR/OV to human anti-mouse
antibody-negative patients who are
12
<PAGE>
at risk of recurrence of their cancer. While an important next step for
OncoScint, CYTOGEN believes that sales of OncoScint CR/OV may be only modestly
increased because of repeat administration. CYTOGEN is establishing a network of
qualified nuclear medicine physicians through its Partners in Excellence or
PIE(TM) Program (the "PIE Program"). The PIE Program includes rigorous training,
testing, and ongoing quality assurance protocols with active support and
certification in conjunction with the American College of Nuclear Physicians.
The PIE Program is being further developed in preparation for the launch of
ProstaScint, for which a Product License Application ("PLA") was accepted as
filed by FDA in March 1995. ProstaScint is currently scheduled to be reviewed by
the Medical Imaging Drug Advisory Committee during the July 1996 meeting. The
timing and outcome of FDA's decision regarding ProstaScint cannot be predicted
by the Company. CYTOGEN is also pursuing a marketing partner for ProstaScint
with experience in urology. There can be no assurance that the PIE Program will
be successful or that a marketing partner will be obtained for ProstaScint.
In December 1995 and January 1996, CYTOGEN entered into agreements with
Faulding and CISbio, respectively, to market and distribute OncoScint CR/OV
outside the U.S. Faulding is currently pursuing the necessary regulatory
approvals in Canada. CISbio has advised the Company that it expects to relaunch
OncoScint CR/OV during 1996 in eight Western European countries and four Eastern
European countries where the product has been approved for marketing. See Note 2
to the Consolidated Financial Statements.
In October 1995, CYTOGEN completed its acquisition of Cellcor by merging
Cellcor with and into a wholly-owned subsidiary of CYTOGEN. See Note 4 to the
Consolidated Financial Statements. Cellcor is a biotechnology company focused on
the development and commercialization of ALT, a proprietary immunotherapy using
a patient's own white blood cells to augment the immune system and thereby treat
cancer and certain infectious diseases. In the fourth quarter of 1995, Cellcor
completed patient accrual for its Phase III pivotal clinical trial using ALT to
treat metastatic kidney cancer patients. The study will conclude in the fourth
quarter of 1996. If results from the trial are favorable and FDA concurs, the
Company expects to proceed with the submission of a PLA in the first half of
1997. There can be no assurance regarding the results of the study or the timing
or outcome of FDA's review.
Cellcor has received FDA approval to proceed with a Treatment IND that
allows ALT to be available as a treatment option for patients who have no
satisfactory alternative therapy to treat their metastatic kidney cancer. The
Treatment IND also allows the Company to recover costs associated with the
treatment. ALT will be available through the Treatment IND while the Company
continues to pursue FDA approval of ALT. As a result of the Cellcor merger,
beginning October 1995, the Company's product related revenues included the cost
recovery related to the treatment of patients receiving ALT under a
compassionate protocol and in 1996, also included the cost recovery related to
the Treatment IND program. In addition, during the three months ended December
31, 1995, the Company recorded a one-time non-cash charge to the statement of
operations of approximately $26.2 million for acquisition of Cellcor technology
rights.
Results of Operations
Revenues. Total revenues for the three months ended March 31, 1996 were
$1.2 million compared to $708,000 recorded in the same period of 1995. The
increase from the prior year
13
<PAGE>
period is primarily attributable to license and contract revenues realized under
the agreements executed in the fourth quarter of 1995 and the first quarter of
1996 with Elan and CISbio, respectively. In addition, during the three months
ended March 31, 1996, CYTOGEN recorded $431,000 in license and contract revenues
from DuPont Merck compared to $333,000 recorded in the same period of the prior
year.
For the three months ended March 31, 1996, product related revenues were
$383,000 compared to $374,000 recorded for the same period of 1995. The 1996
product related revenues included $370,000 from the sales of OncoScint CR/OV and
$13,000 from the cost recovery associated with the ALT Treatment. The 1995
product related revenues were from the sales of OncoScint CR/OV.
License and contract revenues for three months ended March 31, 1996 were
$815,000 compared to $334,000 recorded in the same period of 1995. The increase
over the prior year period is primarily attributable to license and contract
revenues from Elan, CISbio, Faulding and DuPont Merck.
Operating Expenses. Operating expenses for the three months ended March
31, 1996 were $7.3 million compared to $27.7 million recorded in the same period
of 1995. The decrease from the prior year period is largely attributable to a
one-time non-cash charge of $19.7 million recorded in the three months ended
March 31, 1995 for the acquisition of technology and marketing rights associated
with the CytoRad merger. After excluding this one-time charge, 1996 operating
expenses, including $988,000 of expenses from Cellcor operations, were lower
than those recorded in the comparable period of 1995. The level of current year
operating expenses reflects the Company's objective to control spending and to
focus its efforts on its highest priority products and technology, which are (i)
OncoScint CR/OV, (ii) Quadramet, (iii) ProstaScint, (iv) the GDL technology and
(v) ALT therapy for mRCC.
Research and development expenses for the three months ended March 31,
1996 were $4.9 million compared to $5.5 million recorded in the same period of
1995. These expenses principally reflect product development efforts and support
for various ongoing clinical trials. The 1996 research and development expenses
included $903,000 of expenses from Cellcor operations. The 1995 research and
development expenses for the three months ended March 31, 1995 included a charge
of $698,000 for inventory writedown of commercial inventory relating to
OncoScint CR/OV.
Selling and marketing expenses for the three months ended March 31, 1996
were $727,000 compared to $942,000 recorded in the same period of 1995. The
decrease from the prior year period is primarily attributable to the reduction
of salaries and employee related expenses that resulted from the restructuring
of CYTOGEN's sales force in March 1995.
The acquisition of technology and marketing rights expense of $19.7
million recorded for the three months ended March 31, 1995 was a one-time non-
cash charge, representing the amount by which the purchase price exceeded the
fair value of net assets acquired in connection with the CytoRad merger.
General and administrative expenses of $1.6 million for the three months
ended March 31, 1996 were approximately the same amount recorded in the
comparable period of 1995. The 1996
14
<PAGE>
general and administrative expenses included $85,000 of expenses from Cellcor
operations.
Other Income/Expense. Net gains on investments for the three months
ended March 31, 1996 were $380,000 compared to $163,000 realized in the same
period of 1995. The increase from the prior year period is due primarily to
higher average cash and short term investment balances for the period.
Interest expense for the three months ended March 31, 1996 was $114,000
compared to $148,000 recorded in the same period of 1995. The 1996 interest
expense included $103,000 of imputed interest on liabilities associated with
CYTOGEN's termination agreements with Knoll and Chiron compared to $148,000
recorded for the comparable period of 1995.
Net Loss. Net loss for the three months ended March 31, 1996 was $5.8
million compared to a net loss of $27.0 million incurred in the same period of
1995. The loss per common share was $0.12 on 46.9 million average shares
outstanding compared to $0.95 on 28.5 million average shares outstanding for the
same period in 1995. As discussed above, the decrease in the net loss and net
loss per common share is primarily attributable to the charge to the statement
of operations for the acquisition of technology and marketing rights. At March
31, 1996, the Company had outstanding (i) options to purchase up to 3.3 million
shares of CYTOGEN common stock under its various stock option plans with
exercise prices ranging from $2.69 to $17.00 per share; (ii) warrants to
purchase 4.3 million shares of CYTOGEN common stock with exercise prices ranging
from $8.00 to $18.87 per share; and (iii) certain put rights to issue and sell
up to approximately 1.4 million shares of CYTOGEN common stock, subject to
adjustment. The loss per share calculation stated above does not take into
account the shares issuable in connection with such options, warrants and put
rights as their effect is antidilutive.
Liquidity and Capital Resources
The Company's cash and short term investments were $27.2 million as of
March 31, 1996, compared to $28.8 million as of December 31, 1995. The cash used
for operating activities and purchases of property and equipment for the three
months ended March 31, 1996 were $7.2 million and $118,000, respectively,
compared to $6.2 million and $137,000 used in the same period of 1995. This
increase over the prior year period primarily reflects the cash used to fund
Cellcor operations.
Historically, the Company's primary sources of cash have been proceeds
from the issuance and sale of its stock through public offerings and private
placements, product related revenues, the sale of research services, fees paid
under its license agreements and interest earned on its cash and short term
investments.
CYTOGEN Common Stock. In January 1996, Fletcher purchased an aggregate
of 1.0 million shares of CYTOGEN common stock at an aggregate price of
approximately $4.7 million, or $4.70 per share, pursuant to the Option granted
to Fletcher in May 1994, as amended. See Note 10 to the Consolidated Financial
Statements.
CYTOGEN and Nomura executed an agreement effective as of February 23,
1996 that terminated the Purchase Agreement between CYTOGEN and Nomura dated
March 28, 1995. Under that agreement, CYTOGEN could have sold shares of its
common stock to Nomura for
15
<PAGE>
distribution in the public markets. CYTOGEN had filed a Registration Statement
on Form S-3 with the SEC in 1995, which registration statement was never
declared effective. No sales of stock occurred under the terms of the agreement.
Because of certain regulatory requirements governing the transaction, the
structure of the transaction and its implementation as originally contemplated
by the parties and as set forth in the agreement were required to be
substantially revised. The parties agreed that it was not in their respective
best interests to proceed with the transaction under the terms as so revised and
therefore, agreed to terminate the agreement. CYTOGEN has also filed an
application with the SEC for withdrawal of the registration statement.
In April 1996, CYTOGEN sold 729,394 shares of common stock to a private
institutional investor for an aggregate price of $5.0 million, pursuant to the
exercise of a put right that was previously granted to the Company by that
investor. See Note 10 to the Consolidated Financial Statements.
Pursuant to the Investment Agreement, as amended in April 1996, between
CYTOGEN and Fletcher Fund, CYTOGEN has the right until December 15, 1996 to
issue and sell to Fletcher Fund, and Fletcher Fund will be obligated to
purchase, up to 675,000 shares of CYTOGEN common stock from time to time at a
purchase price per share equal to 101% of the average of the daily volume
weighted average price of CYTOGEN common stock on NASDAQ during (a) a designated
twenty-one business day period or (b) the last three business days of said
designated twenty-one business day period, whichever is less. Under certain
circumstances, Fletcher Fund will have the right to decrease or increase the
number of shares of CYTOGEN Common Stock to be purchased in connection with the
exercise of a Put Right by the Company, but in no event shall the total number
of shares sold by the Company and purchased by Fletcher Fund pursuant to the
Investment Agreement exceed 4.9% of the total number of shares of CYTOGEN common
stock outstanding, after giving effect to the proposed sale and purchase of the
shares in question. The shares to be issued and sold in this transaction were
registered pursuant to a registration statement on Form S-3 filed with the SEC
in April 1994. See Note 10 to the Consolidated Financial Statements.
In April 1996, the SEC declared effective the Company's new shelf
registration statement on Form S-3, which registers 5.0 million shares of common
stock. Under the shelf registration, CYTOGEN may sell shares on a negotiated or
competitive bid basis through underwriters, dealers or agents designated from
time to time, or directly to other purchasers from time to time, as market
conditions permit. CYTOGEN has not entered into any agreement relating to the
sale of these shares.
Product Related Revenues. To date, sales of OncoScint CR/OV have not
been significant and are not expected to become a significant source of cash
flow in 1996. In May 1995, CYTOGEN announced its initial implementation of the
PIE Program described above. Depending on the success of the PIE Program,
significant resources might be required. There can be no assurance that this
marketing strategy will be successful.
In November 1994, the Company executed the Termination Agreement with
Knoll, pursuant to which the Company is required to pay to Knoll, over a four-
year period and without interest, $3.0 million to reacquire the U.S. Rights and
$5.0 million of liabilities previously incurred under the terms of a license,
supply and marketing agreement executed in December 1991. The
16
<PAGE>
payment of these liabilities will be made as follows: $3.1 million in 1995,
which amount has been paid; $1.6 million in 1996; $1.6 million in 1997; and $1.7
million in 1998.
In December 1994, CYTOGEN entered into the Disengagement Agreement with
Chiron to reacquire the European Rights and purchase certain business assets
relating to the European Rights. The resulting liability of CYTOGEN to Chiron
will be paid over three years and without interest, as follows: $200,000 in
1995, which amount has been paid; $300,000 in 1996; and $377,000 in 1997.
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.
In December 1995 and January 1996, CYTOGEN entered into agreements with
Faulding and CISbio, respectively, to market and distribute OncoScint CR/OV
outside the U.S. Faulding is currently pursuing the necessary regulatory
approvals in Canada. CISbio has advised the Company that it expects to relaunch
OncoScint CR/OV during 1996 in eight Western European countries and four Eastern
European countries, where the product has been approved for marketing. In
addition to one-time, up-front cash payments for execution of the agreements,
which amounts were recognized by the Company in 1996, each of Faulding and
CISbio will be required to make payments upon the achievement of certain
milestones, payments for the purchase of products and royalties on net sales, if
any. See Note 2 to the Consolidated Financial Statements.
Beginning October 1995, as a result of the Cellcor merger, the Company's
product related revenues included the cost recovery related to the treatment of
patients receiving ALT under a compassionate protocol, and in 1996 also included
the cost recovery associated with the Treatment IND program.
Research Services and Licenses. Pursuant to the terms of the DP/Merck
Agreement between CYTOGEN and DuPont Merck, CYTOGEN will receive from DuPont
Merck future payments of up to $2.5 million towards additional clinical
programs, a $2.0 million milestone payment if and when Quadramet receives FDA
approval and royalty payments based on sales, including guaranteed minimum
payments. For the three months ended March 31, 1996, CYTOGEN recorded $431,000
in license and contract revenues from DuPont Merck. See Note 5 to the
Consolidated Financial Statements.
CYTOGEN acquired an exclusive license in the U.S. from Dow for Quadramet
in 1993. This license was amended in 1995 to expand the territory to include
Canada and Latin America. The Company will be required to pay to Dow $4.0
million if and when Quadramet 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 1995, the Company and Elan entered into the Elan Agreement,
under which Elan will provide the funding necessary for the Company to fulfill
its obligations under the research program, with aggregate payments for work
performed by CYTOGEN not to exceed $1.5 million during the first sixteen months
of the research program. For the three months ended March 31, 1996, CYTOGEN
recorded $156,000 in contract revenues from Elan. See Note 3 to the Consolidated
Financial Statements.
17
<PAGE>
The Company's capital and operating 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;
and (iii) competitive and technological developments. The Company plans to
continue to control spending and expects that its existing cash and short term
investments of $27.2 million at March 31, 1996, together with other financing
and acquisition opportunities which may become available, the $5.0 million
received in April 1996 from the sale of stock, the potential sales of stock
pursuant to the Put Rights described above and the receipt of additional funds
from DuPont Merck and Elan in accordance with the terms of the DP/Merck
Agreement and Elan Agreement, respectively, will be adequate to support the
Company's operations into 1997.
The Company's financial strategy is to meet its capital and operating
requirements through revenues from existing products, the establishment of
strategic marketing alliances and research and development partnerships, the
acquisition, in-licensing and development of other technologies, products or
services, subcontract manufacturing revenues, license and contract revenues,
sale of equity securities as market conditions permit, interest income, and a
continued commitment to control spending. Certain of these transactions may
require payments by the Company in either cash or stock in addition to the costs
associated with developing and marketing any product or technology and, if
successful, increase long term revenues. There can be no assurance as to the
strategy's success or that any resulting funds 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.
The foregoing discussion contains historical information as well as
forward looking statements that involve a number of risks and uncertainties. In
addition to the risks discussed above, among other factors that could cause
actual results to differ materially from expected results are the following: (i)
the timing and results of clinical studies; (ii) market acceptance of the
Company's products, including programs designed to facilitate use of the
products, such as the PIE Program and the use of teleradiology; (iii) the
profitability of its products; (iv) the ability to attract, and the ultimate
success of strategic partnering arrangements, collaborations, and acquisition
candidates; (v) the ability of the Company and its partners to identify new
products as a result of those collaborations that are capable of achieving FDA
approval, that are cost-effective alternatives to existing products and that are
ultimately accepted by the key users of the product; (vi) the success of the
Company's distributors in obtaining marketing approvals in Canada and in
additional European countries, in achieving milestones and achieving sales of
products resulting in royalties; and (vii) the Company's ability to access the
capital markets in the future for continued funding of existing projects and for
the pursuit of new projects.
18
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1- Amendment of the License Agreement between CYTOGEN
Corporation and The Dow Chemical Company dated September 5,
1995.*
10.2- Amendment to the License Agreement between CYTOGEN
Corporation and The DuPont Merck Pharmaceutical Company dated
March 29, 1996.*
10.3- First Amendment to Investment Agreement between CYTOGEN
Corporation and Fletcher Fund, L.P. dated April 26, 1996.
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.
(b) Reports on Form 8-K:
The Company filed two reports on Form 8-K during the three months
ended March 31, 1996 and the dates of such reports were February 23,
1996 and March 29, 1996. The Form 8-K dated February 23, 1996
reported on "Item 5. Other Events" regarding the termination of the
CVRs and termination of the Purchase Agreement between CYTOGEN
Corporation and Nomura Securities International, Inc. The Form 8-K
dated March 29, 1996 reported on "Item 5. Other Events" with respect
to a press release announcing the filing of a shelf registration
statement on Form S-3.
19
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
CYTOGEN CORPORATION
Date May 9, 1996 By /s/ T. Jerome Madison
----------- ------------------------
T. Jerome Madison
Chief Financial Officer
(Authorized Officer and Principal Financial
Officer)
20
<PAGE>
AMENDMENT OF THE LICENSE AGREEMENT EFFECTIVE MAY 30, 1993
---------------------------------------------------------
BETWEEN THE DOW CHEMICAL COMPANY AND CYTOGEN CORPORATION
--------------------------------------------------------
This Amendment ("Amendment") to the License Agreement effective May 30, 1993
("License") between The Dow Chemical Company ("DOW") and CYTOGEN Corporation
("CYTOGEN") is desired to expand the territories in which CYTOGEN is licensed
and to provide written understanding of the oral agreement with regard to the
trade mark issues.
NOW, THEREFORE, DOW and CYTOGEN, in consideration of the mutual covenants
contained herein, agree as follows:
I. The original Articles of the License are modified as follows:
- ----------------------------------------------------------------
Article 1 -
- ---------
1.2 After the words "UNITED STATES" insert "or appropriate
governmental authorities in CANADA and LATIN AMERICA."
1.12 At the end of the sentence insert ", including appropriate
governmental agencies in CANADA and LATIN AMERICA."
1.18 Sections (iv) and (vi), after the words "UNITED STATES" insert ",
CANADIAN or LATIN AMERICAN."
1.20 After the words "UNITED STATES" insert ", CANADA and LATIN
AMERICA." The last sentence in the Paragraph is deleted.
Article 2 -
- ---------
2.1 Sections (a) and (b), after the words "UNITED STATES" insert ",
CANADA and LATIN AMERICA."
2.2 After the words "UNITED STATES" insert ", CANADA and LATIN
AMERICA. "
2.3 All sections, after the words "UNITED STATES" insert ", CANADA
and LATIN AMERICA."
Article 3 -
- ---------
3.3 All sections, after the words "UNITED STATES" insert ", CANADA
and LATIN AMERICA."
Article 6 -
- ---------
6.2 After the words "UNITED STATES" insert ", CANADA and LATIN
AMERICA."
6.4.1 After the words "UNITED STATES" insert ", CANADA and LATIN
AMERICA."
Article 8 -
- ---------
[ Information omitted and filed separately with the Commission under
Rule 24b-2.
<PAGE>
Article 11 -
- ----------
11.1 After the words "UNITED STATES" insert ", CANADA or LATIN
AMERICA."
Article 18 -
- ----------
18.2 Delete the words "UNITED STATES" insert "TERRITORY."
Article 20 -
- ----------
20.1 After the words "UNITED STATES" insert "or the appropriate laws
of CANADA or of each country in LATIN AMERICA."
Revised Appendices A, B and C to include CANADA and LATIN AMERICA are provided
herewith and made a part hereof.
II. The following Articles are added to the License:
- ----------------------------------------------------
Article 1
- ---------
1.31 "CANADA" means Canada comprising its provinces of Alberta,
British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario,
Prince Edward Island, Quebec, Saskatchewan and Newfoundland, the
Northwest Territories, and the Yukon Territory.
1.32 "LATIN AMERICA" means Central America, South America and the West
Indies as follows -
Central America, including Belize, Costa Rica, El Salvador,
Guatemala, Honduras, Mexico, Nicaragua and Panama;
South America, including Argentina, Bolivia, Brazil, Chile,
Columbia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and
Venezuela; and
West Indies, including Anguilla, Antigua, Aruba, Bahamas,
Barbados, Bermuda, Cayman Islands, Dominica, Dominican Republic,
Grenada, Guadeloupe, Haiti, Jamaica (including Turks and Caicos),
Martinique, Netherlands Antilles, St. Christopher & Nevis, St.
Lucia, St. Vincent and the Grenadines, Trinidad & Tobago, and
British Virgin Islands. That if the embargo by the United States
against Cuba is
-2-
<PAGE>
lifted during the term of this Amendment as defined in Article
17, then Cuba may be included in the TERRITORY.
1.33 "TERRITORY" means UNITED STATES, CANADA and LATIN AMERICA.
Article 6 -
- ---------
6.1.9 File the NDA packaged, modified as needed, with the CANADIAN
governmental authorities for PRODUCT for the FIELD using
CYTOGEN's best efforts within six (6) months from the last
signature to this Amendment;
6.1.10 Begin commercial sale of the PRODUCT for the FIELD in CANADA
within ninety (90) days after receipt of APPROVAL for the FIELD
from the CANADIAN authorities;
6.1.11 File the NDA package, modified as needed or required, or other
appropriate applications for marketing authorizations with
governmental authorities in each of five (5) countries in LATIN
AMERICAN for PRODUCT for the FIELD using CYTOGEN's best efforts
within twelve (12) months from CYTOGEN's receipt from the FDA of
APPROVAL of its NDA package;
6.1.12 Begin commercial sale of the PRODUCT for the FIELD in each of
five (5) countries in the LATIN AMERICAN region within ninety
(90) days after receipt of APPROVAL for the FIELD from their
respective authorities. If no APPROVAL is required, then begin
commercial sale of the PRODUCT for the FIELD in that country
within twelve (12) months from CYTOGEN's receipt from the FDA of
APPROVAL of its NDA package.
Article 8 -
- ---------
8.2 [ Information omitted and filed separately with the Commission
under Rule 24b-2.
-3-
<PAGE>
Article 24 -
----------
24.1 CYTOGEN consents that a trademark should be mutually agreed upon
between CYTOGEN and CIS, if possible, for use with PRODUCT in the
FIELD. As of the Effective Date of this Amendment, QUADRAMET has
been applied for in the UNITED STATES. Upon execution of this
Amendment, QUADRAMET shall be filed in the name of CYTOGEN in
CANADA and LATIN AMERICA in accord with Article 24.2. CYTOGEN
shall only use this trademark with PRODUCT in the FIELD in the
TERRITORY. If CYTOGEN becomes aware of a possible infringement of
a third party trademark, CYTOGEN shall notify DOW and discuss the
possible action available, including, but not limited to, buying
the third party trademark, defending a suit for infringement of
the third party trademark, or obtaining DOW's consent to use
another trademark in that country (which consent will not be
unreasonably withheld).
24.2 The trademark shall be obtained by DOW and assigned to CYTOGEN
for the TERRITORY. DOW shall confirm that CYTOGEN desires to
proceed with such trademark in the UNITED STATES, CANADA and
LATIN AMERICA at each step concerning costs in the process, i.e.,
filing for the mark and prosecution. CYTOGEN will have twenty
(20) days from DOW's written notice of such intent to indicate
whether CYTOGEN desires that DOW proceed to file in all
countries. Absent any timely instructions to the contrary, DOW
will authorize the trademark to be filed in all countries of the
TERRITORY. In any country where CYTOGEN states that DOW should
not file the mark, then if at a later time CYTOGEN decides it
does desires the mark in that country, CYTOGEN must proceed on
its own to file the mark in that country.
DOW shall only charge CYTOGEN its actual costs (including, but
not limited to, pro rata costs for search(s) and attorney fees,
and actual filing, prosecution, grant and assignment costs) for
obtaining the trademark in each country of the TERRITORY. When
DOW provides CYTOGEN with written notice of an action to be taken
(e.g., filing for the mark or prosecution), if CYTOGEN has not
replied within twenty (20) days from the date of said notice,
then DOW may proceed with the required act at CYTOGEN's expense.
If CYTOGEN elects not to pursue a trademark in any given country
in the TERRITORY at any time prior to its assignment to CYTOGEN,
then DOW may continue to pursue the
-4-
<PAGE>
trademark, and if the trademark is obtained, shall offer it to
CYTOGEN under the terms of Article 24. If CYTOGEN then decides
not to obtain the trademark, DOW may do with the trademark as it
desires.
24.3 DOW does not warrant that the trademark can be obtained in each
---
country of the TERRITORY, but shall use good faith efforts to
obtain it. Under no condition shall DOW be in breach of this
Amendment or License for its acts or failure to act under Article
24.
24.4 If the License is terminated for one of the reasons referred to
under Article 17.3, 17.4, or 17.5, then the trademark is to
revert to DOW by assignment (free of costs to DOW) for all
countries in the TERRITORY. If this License is terminated under
Article 17.2 for one or more of the three (3) regions, namely,
LATIN AMERICA, CANADA or the UNITED STATES, then the trademark is
to revert to DOW by assignment (free of costs to DOW) for all
countries in that region of the TERRITORY. For any region not so
terminated, CYTOGEN may retain the trademark.
24.5 If additional trademark terms prove necessary during the
implementation of this Article 24, then there shall be an
amendment made to this Amendment.
III. Other Understandings Agreed Upon:
- --------------------------------------
The Parties agree that all data for the registration of the PRODUCT in
CANADA and LATIN AMERICA shall be available to DOW for use with its other
licensees outside of the TERRITORY without further payment to CYTOGEN. Thus no
amendment is required of Article 3.4 or Exhibit E.
Within ten (10) days after signature by the last Party to this Amendment,
CYTOGEN shall pay to DOW One Thousand Dollars ($1,000.00US).
The arbitration of Article 20.3 and litigation of Article 20.4, if CANADIAN
laws are concerned will include experts in that field or the litigation will
occur in CANADA, and if LATIN AMERICAN laws are concerned, will include experts
in that field and Article 20.3 shall apply, with litigation under Article 20.4
in the UNITED STATES, if possible.
All other terms of the prior License remain as stated therein.
-5-
<PAGE>
IN WITNESS WHEREOF, the Parties have duly executed this Amendment in duplicate
by their appropriate authorized representative, effective as of the last date
set forth below ("Effective Date").
THE DOW CHEMICAL COMPANY CYTOGEN CORPORATION
By:/s/ Fred P. Corson By:/s/ Richard J. Walsh
-------------------------- ----------------------
Name Fred P. Corson Name Richard J. Walsh
Title Vice President Title Vice President
Research and Development Corp. Development
Date: September 5, 1995 Date: August 28, 1995
------------------------- --------------------
LIST OF APPENDICES
- ------------------
APPENDIX A US PATENTS FOR PRODUCT OR BONE AGENT IN FIELD
APPENDIX B US PATENTS FOR PRODUCT OR BONE AGENT IN EXPANSION OF LICENSED
FIELD
-6-
<PAGE>
AMENDMENT TO THE LICENSE AGREEMENT, EFFECTIVE
DECEMBER 20, 1994
BY AND BETWEEN CYTOGEN CORPORATION AND
THE DUPONT MERCK PHARMACEUTICAL COMPANY
Cytogen Corporation ("Cytogen") and The DuPont Merck Pharmaceutical Company
("DP/Merck") wish to adopt this amendment (the "Amendment") made this 29th day
of March, 1996 to their License Agreement dated December 20, 1994 (the "License
Agreement") to, among other things (i) expand the territory covered by the terms
of the License, and (ii) license to DP/Merck the right to use the trademark
"Quadramet".
NOW, THEREFORE, Cytogen and DP/Merck, in consideration of the mutual covenants
and promises contained herein, agree as follows:
I. The original Recitals of the License Agreement are modified as
- -- --------------------------------------------------------------
follows:
--------
2 & 4 Replace the words "United States" with the word "Territory" in all
places where it appears.
II. The terms of the existing Articles of the License Agreement are
- --- ---------------------------------------------------------------
modified as follows:
--------------------
Article 1
- ---------
1.4 & 1.9 Schedule A attached hereto and made a part hereof supersedes and
replaces Schedule A to the License Agreement in its entirety.
Article 4
- ---------
4.1 Replace the words "United States" with the word "Territory". Any
reference to Cytogen's duty to obtain NDA approval for the Product is
hereby amended to include as well all regulatory approvals necessary
for marketing and sale of the Product in Canada and in the countries
of Latin America. The following sentences are hereby added to the end
of Section 4.1:
"DP/Merck or its sublicensee shall begin commercial sale of the
Product for the Field (i) in Canada within ninety (90) days after
receipt of approval from the Canadian authorities, and (ii) in each of
the first three (3) countries in Latin America in which the product is
approved, within ninety (90) days after receipt of such approval from
their respective authorities. If no approval is required in a given
Latin American country, then DP/Merck shall begin commercial sale of
the Product in such country within
<PAGE>
twelve (12) months from Cytogen's receipt of NDA approval from the
FDA.
4.5(c) Replace the words "United States" with the word "Territory."
Article 5
- ---------
5. After "requirements of the FDA and applicable" replace "federal and
state law" with "law, including international, regional, national,
federal, state, provincial, municipal and any other local law"
Article 6
- ---------
6.1(a) Replace the words "United States" with the word "Territory".
6.1(c) Replace the words "United States" with the word "Territory".
6.1(d) Replace the words "United States" with the word "Territory".
Article 7
- ---------
7.1(c) Replace the words "United States" with the word "Territory".
7.2(b) Replace the words "United States" with the word "Territory".
7.2(c) Replace the words "United States" with the word "Territory".
Article 11
- ----------
11.1(d) Replace both instances of the words "United States" with the word
"Territory".
11.1(e) Replace the words "United States" with the word "Territory".
-2-
<PAGE>
III The following terms are hereby added to the License Agreement:
- --- --------------------------------------------------------------
Article 1
- ---------
1.22 "Territory" shall mean the United States, Canada and Latin America.
1.23 "Canada" shall mean Canada comprising its provinces of Alberta,
British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario,
Prince Edward Island, Quebec, Saskatchewan and Newfoundland, the
Northwest Territories and the Yukon Territory.
1.24 "Latin America" shall mean Central America, South America and the West
Indies as follows:
"Central America" shall mean Belize, Costa Rica, El Salvador,
Guatemala, Honduras, Mexico, Nicaragua and Panama;
"South America" shall mean Argentina, Bolivia, Brazil, Chile,
Columbia, Ecuador, Guyana, Paraguay, Peru, Surinam, Uruguay and
Venezuela; and "West Indies" shall mean Anguilla, Antigua, Aruba,
Bahamas, Barbados, Bermuda, Cayman Islands, Dominica, Dominican
Republic, Grenada, Guadeloupe, Haiti, Jamaica (including Turks and
Caicos), Martinique, Netherlands Antilles, St. Christopher & Nevis,
St. Lucia, St. Vincent and the Grenadines, Trinidad & Tobago and
British Virgin Islands. If the embargo by the United States against
Cuba is lifted during the term of the License Agreement, then Cuba
shall be included in the Territory.
Article 2
- ---------
2.4 [ Information omitted and filed separately with the Commission under
Rule 24b-2.
-3-
<PAGE>
Article 6
- ---------
6.2 License of Trademark
--------------------
(a) Cytogen grants DP/Merck an exclusive license, with right to
sublicense, to use the trademark "Quadramet" (the "Mark") in
connection with the manufacture, use and sale of the Licensed Product
in the Territory. DP/Merck agrees that all use of the Mark shall
inure to the exclusive benefit of Cytogen for trademark purposes, and
DP/Merck agrees not to challenge Cytogen's ownership of the Mark or
the validity of the Mark or this license.
(b) Cytogen shall have the right to monitor and inspect the quality of
the Mark appearing on the Licensed Product on reasonable notice. At
Cytogen's request, DP/Merck shall submit for Cytogen's inspection
representative samples of all advertising, promotional and marketing
materials bearing the Mark used in connection with the Licensed
Product. DP/Merck acknowledges that the purpose of the inspections
conducted by Cytogen is to maintain the reputation, image and goodwill
of the Mark.
(c) Each party shall indemnify, defend and hold the other party
harmless against any and all claims, losses, liabilities, damages, and
expenses (including attorney's fees and expenses) arising from or
relating to the indemnifying party's use of the Mark in marketing,
distributing, selling or promoting the Licensed Product. DP/Merck
shall take no action that would prejudice or interfere with the
validity of or Cytogen's ownership of the Mark, and DP/Merck shall not
enter into any agreement with any third party that in any way alters,
diminishes or restricts the rights of Cytogen in the Mark or places
any restrictions or conditions upon the use or appearance of any Mark
without the prior written permission of Cytogen. DP/Merck shall not
prosecute any application for the registration of any trademark,
service mark or trade name containing any form or variation of any
Mark without the permission of Cytogen.
(d) DP/Merck shall reasonably cooperate with Cytogen, at Cytogen's
expense, in maintaining and defending the
-4-
<PAGE>
validity and ownership of the Mark and any registrations of the Mark,
and in protecting the Mark against infringement. Each party shall
promptly notify the other party of (i) any unauthorized use or
infringement by any third party of any Marks or (ii) any assertion by
any third party that use of any Mark constitutes trademark, service
mark, trade dress or trade name infringement, unfair competition or
any other tortious act of which it becomes aware. Cytogen may in its
sole discretion choose to initiate or defend any legal action with
regard to any Mark. If Cytogen fails to initiate or defend any such
legal action with regard to the Mark within three months of receiving
notice as contemplated hereunder, then DuPont Merck will be free to
initiate or defend such legal action if DuPont Merck, in its sole
discretion, chooses to do so. In the event a party initiates
prosection or defense of an action then the other party shall
reasonably cooperate in the prosecution or defense of the action.
(e) Cytogen makes no representations or warranties concerning the
Mark. Neither party may assign any of its rights and obligations
hereunder (whether by operation of law or otherwise) without the prior
written consent of the other party.
All other terms of the License remain as stated therein.
IN WITNESS WHEREOF, the parties have duly executed this Amendment in
duplicate by their appropriate authorized representatives as of the date first
above written.
THE DUPONT MERCK
PHARMACEUTICAL COMPANY
By:/s/ Kenneth G. Kasses
-------------------------------------
Title: President,
Radiopharmaceutical Div.
CYTOGEN CORPORATION
By:/s/ Richard J. Walsh
-------------------------------------
Title: Richard J. Walsh
Vice Pres., Corp. Dev.
Cytogen Corporation
-5-
<PAGE>
LIST OF SCHEDULES
-----------------
REVISED SCHEDULE A - PATENTS AND PATENT APPLICATIONS
-6-
<PAGE>
EXHIBIT 99
FIRST AMENDMENT TO INVESTMENT AGREEMENT
Between
CYTOGEN CORPORATION
and
FLETCHER FUND, L.P.
--------------------------------------
Dated as of April 26, 1996
<PAGE>
THIS FIRST AMENDMENT TO INVESTMENT AGREEMENT (this "Amendment") is
dated as of April 26, 1996 between FLETCHER FUND, L.P., a Delaware limited
partnership (the "Investor"), and CYTOGEN CORPORATION, a corporation organized
and existing under the laws of the State of Delaware (the "Company").
WHEREAS, the Investor and the Company have entered into that certain
Investment Agreement dated as of September 8, 1995 (the "Investment Agreement")
pursuant to which (a) the Investor acquired 665,352 shares of common stock, par
value $.01 per share (the "Common Stock"), of the Company and (b) the parties
agreed that the Company will have the right to sell, from time to time, shares
of Common Stock to the Investor and the Investor will have the obligation to
purchase such shares, pursuant to certain Put Rights, on the terms and subject
to the conditions set forth in the Investment Agreement;
WHEREAS, on March 12, 1996, the Company delivered to the Investor an
exercise notice (the "Exercise Notice") whereby the Company exercised one (1)
Put Right to sell to the Investor an additional 225,000 shares of Common Stock;
and
WHEREAS, in consideration for the execution, delivery and performance
of this Amendment, the Company has agreed to withdraw the Exercise Notice and
the Investor has agreed, among other things, to extend the Expiration Date of
the Put Rights;
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby agree as follows:
Section 1. All capitalized terms used herein and not otherwise
defined shall have the respective meanings ascribed to them in the Investment
Agreement.
Section 2. The defined term "Trading Price" contained in Section
2.1.1 of the Investment Agreement is hereby deleted and amended and restated to
read in its entirety as follows:
" 'Trading Price'" shall mean the lesser of (a) 101% of the
average of the daily volume weighted average price (rounded to the
nearest thousandth of a dollar) of the Common Stock as reported on
Nasdaq (as published by Bloomberg Financial Markets) during the
Pricing Period or (b) 101% of the average of the daily volume weighted
average price (rounded to the nearest thousandth of a dollar) of the
Common Stock as reported on Nasdaq (as published by Bloomberg
Financial Markets) during the last three (3) Business Days of the
Pricing Period."
<PAGE>
Section 3. Sections 2.1.2(a), (b) and (f) of the Investment Agreement
are hereby deleted and amended and restated to read in their entirety as
follows:
"(a) Subject to the terms and conditions set forth herein,
the Company shall have the right (each, a "Put Right") to issue and
sell to the Investor pursuant to the Registration Statement under the
Securities Act, and the Investor shall be obligated to purchase, an
aggregate of 225,000 shares of Common Stock (as adjusted in accordance
with the terms of this Agreement), from time to time and at any time,
upon delivery by the Company to the Investor of a written notice (the
"Put Notice"); provided, however, that, except as provided in Section
-------- -------
2.1.2(d) hereof, the Company shall not exercise more than three (3)
Put Rights during the period beginning on October 13, 1995 and ending
on December 15, 1996 (the "Expiration Date"), except that a Put Right
exercise that is terminated as a result of an Exercise Termination
(defined below) shall not be counted as the exercise of a Put Right
and shall not reduce the number of Put Rights thereafter available for
exercise; and provided, further, that the Company shall have the right
-------- -------
to set forth in the Put Notice the minimum Trading Price below which
the Company shall no longer be obligated to sell the Put Shares
pursuant to the applicable Put Notice (the "Minimum Acceptable
Price"). If the Trading Price is below the Minimum Acceptable Price,
the Company's obligation to issue and sell the Put Shares and the
Investor's obligation to purchase the Put Shares under the applicable
Put Notice shall terminate (an "Exercise Termination"), unless the
Investor elects to purchase the Put Shares at the Minimum Acceptable
Price or the parties otherwise agree in accordance with the provisions
of Section 2.1.2(f) hereof. Except in the case of an Exercise
Termination, by delivery of the Put Notice, the Company shall be
obligated to sell to the Investor, and the Investor shall be obligated
to purchase from the Company (even if the related Put Closing Date
(defined below) occurs after the Expiration Date), at the applicable
Trading Price, that number of shares of Common Stock (the "Put Shares"
and together with the Initial Shares, collectively, the "Shares")
equal to the Final Put Amount (defined below). Each purchase of the
Put Shares shall occur on the related Put Closing Date."
"(b) To exercise a Put Right, the Company shall, on any
Business Day, deliver a Put
-2-
<PAGE>
Notice to the Investor, at the address of the Investor specified in
Section 7.5 hereof, specifying (i) the number of shares of Common
Stock to be sold by the Company upon exercise of the Put Right (the
"Put Amount"), which, except as provided in Sections 2.1.2(d) and (e)
hereof, shall be 225,000 shares and (ii) the Minimum Acceptable Price.
No Put Notice shall be delivered on any date subsequent to the
Expiration Date and, without the Investor's prior consent, not more
than one Put Right may be exercised during any period of twenty-five
(25) consecutive Business Days. Without the Investor's prior consent,
no Put Notice shall be delivered if any person shall have (i) publicly
announced a tender offer or exchange offer for all the Common Stock,
(ii) publicly announced plans for a merger or consolidation in which
the Company is not the surviving entity, or a potential change in
control of the Company, or (iii) publicly announced the delisting of
the Common Stock from Nasdaq, until the tender offer, exchange offer,
merger or consolidation is completed or the Common Stock is again
listed on a national securities exchange."
"(f) No later than 11:00 a.m. on the next Business Day
following the last Business Day of each Pricing Period, the Company
shall notify the Investor of the applicable Trading Price for such
Pricing Period. If the Trading Price is below the Minimum Acceptable
Price, the Company's obligation to issue and sell the Put Shares and
the Investor's obligation to purchase the Put Shares under the
applicable Put Notice shall terminate, unless (i) the Investor elects
to purchase the Put Shares at the Minimum Acceptable Price, in which
case the Company shall be obligated to sell such Put Shares at the
Minimum Acceptable Price or (ii) the parties otherwise agree to
proceed with the sale and purchase, in each case, such agreement to
occur no later than 5:00 p.m. on the next Business Day following the
last Business Day of the applicable Pricing Period. If the parties
proceed with the sale and purchase pursuant to the terms of Section
2.1.2(f)(i) or (f)(ii) hereof, the Closing shall occur in accordance
with Section 2.1.3 hereof. If the Investor does not elect to purchase
the Put Shares pursuant to Section 2.1.2(f)(i) or if the parties do
not agree to proceed with the sale and purchase pursuant to the terms
of Section 2.1.2(f)(ii), then the Put Right exercise that is the
subject of the Exercise Termination shall not be counted as the
exercise of a Put Right and shall not reduce the number
-3-
<PAGE>
of Put Rights thereafter available for exercise. In the event of a
dispute between the Company and the Investor concerning the Trading
Price, which cannot in good faith be resolved between the Company and
the Investor, the Company shall appoint a firm of independent
certified public accountants of recognized national standing or other
independent third party agreed upon by the Company and the Investor,
which shall give their opinion upon the determination of the Trading
Price, which opinion shall be conclusive."
Section 4. Section 3.1(c) of the Investment Agreement is hereby
deleted and amended and restated to read in its entirety as follows:
"(c) Capitalization. As of March 29, 1996, the authorized
--------------
capital stock of the Company consists of (i) 69,600,000 shares of
Common Stock, of which 47,135,094 shares were issued and outstanding;
and (ii) 5,400,000 shares of Preferred Stock, $.01 par value (the
"Preferred Stock"), of which as of the close of business on March 29,
1996, no shares were issued and outstanding. All of such outstanding
shares of Common Stock have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are entitled to preemptive
rights. Except as disclosed in Schedule 3.1(c) attached hereto, as of
March 29, 1996, there are no outstanding options, warrants, scrip,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, or contracts, commitments,
understandings, or arrangements by which the Company is or may become
bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe for, or commitments to
purchase or acquire, any shares or securities or rights convertible
into shares, of capital stock of the Company. The Company has
furnished to the Investor true and correct copies of the Company's
Amended and Restated Certificate of Incorporation as in effect on the
date hereof (the "Certificate of Incorporation"), and the Company's
By-laws, as amended, as in effect on the date hereof (the "By-laws")."
Schedule 3.1(c) to the Investment Agreement is amended and restated to provide
the required information to the Investor as of the date of this Amendment, as
more fully set forth on Schedule 3.1(c) attached hereto.
-4-
<PAGE>
Section 5. Upon effectiveness of this Amendment, each reference in
the Investment Agreement to "this Agreement", "hereunder", "hereof", "herein"
and words of like import shall mean and be a reference to the Investment
Agreement as amended hereby. Except as specifically set forth herein, the terms
and conditions of the Investment Agreement remain unchanged and in full force
and effect.
Section 6. The Investor hereby acknowledges that the Company proposes
to amend its Certificate of Incorporation to increase the total number of
authorized shares of capital stock from 75,000,000 shares to 95,000,000 shares
and to increase the total number of authorized shares of Common Stock from
69,600,000 shares to 89,600,000 shares (the "COI Amendment"), upon receipt of
the requisite stockholder approval. The Investor hereby consents to the COI
Amendment and waives any rights it may have under Section 4.2 of the Investment
Agreement in respect of the COI Amendment.
Section 7. This Amendment may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause four additional
executed signature pages to be physically delivered to the other party within
five days of the execution and delivery hereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the date hereof.
CYTOGEN CORPORATION
By:/s/ T. Jerome Madison
------------------------------
Name: T. Jerome Madison
Title: Vice President, Chief Financial Officer and
Secretary
FLETCHER FUND, L.P.
By: Fletcher Asset Management, Inc.,
its general partner
By:/s/ Alphonse Fletcher, Jr.
--------------------------
Name: Alphonse Fletcher, Jr.
Title: Chairman
-6-
<PAGE>
Schedule 3.1(c)
Capitalization
--------------
<TABLE>
<CAPTION>
Outstanding at
March 29, 1996
---------------
<S> <C>
1. Options to Purchase Shares
of Common Stock 3,654,253
2. Warrants to Purchase Shares
of Common Stock 4,291,742
3. Put rights to sell Shares of
Common Stock pursuant to Regulation
S of the Securities Act* 729,394
4. 149,454 shares remained to be issued to
Cellcor stockholders who had not
yet tendered their shares for exchange
in connection with the Company's
acquisition of Cellcor consummated on
October 20, 1995.
</TABLE>
__________________________________
* The closing of the sale of these shares is scheduled to occur on April 4,
1996. The aggregate purchase price for these shares is $5,000,000.
-7-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The
Consolidated Balance Sheets as of March 31, 1996 and the Consolidated Statements
of Operations for the three-month period ended March 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 22,113,000
<SECURITIES> 5,104,000
<RECEIVABLES> 990,000
<ALLOWANCES> (536,000)
<INVENTORY> 317,000
<CURRENT-ASSETS> 633,000
<PP&E> 16,503,000
<DEPRECIATION> (11,346,000)
<TOTAL-ASSETS> 35,328,000
<CURRENT-LIABILITIES> 6,773,000
<BONDS> 0
0
0
<COMMON> 473,000
<OTHER-SE> 24,737,000
<TOTAL-LIABILITY-AND-EQUITY> 35,328,000
<SALES> 383,000
<TOTAL-REVENUES> 1,198,000
<CGS> 0
<TOTAL-COSTS> 818,000
<OTHER-EXPENSES> 6,446,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,000
<INCOME-PRETAX> (5,800,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,800,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,800,000)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
