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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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, 1995
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
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2322400
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
600 COLLEGE ROAD EAST, 08540-5308
CN5308, (ZIP CODE)
PRINCETON, NEW JERSEY
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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
(TITLE OF CLASS)
WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK, $.01 PAR VALUE, OF REGISTRANT
(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 [_] .
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. [X]
The aggregate market value of the registrant's 40,579,729 shares of Common
Stock held by non-affiliates of the registrant on February 22, 1996, based on
$7.4375 per share, the last reported sale price on the NASDAQ National Market
on that date, was $301,811,734.
The number of shares of Common Stock outstanding as of February 22, 1996 was
46,881,707 shares.
DOCUMENTS INCORPORATED BY REFERENCE
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FORM 10-K
DOCUMENT PART
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<S> <C>
Portions of the definitive Proxy Statement with III
respect to the 1996 Annual Meeting of Stock-
holders (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 incor-
porated by reference herein.
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PART I
ITEM 1. BUSINESS
GENERAL
CYTOGEN Corporation ("CYTOGEN" or the "Company"), a Delaware corporation, is
a biopharmaceutical company engaged in the discovery, development, manufacture
and marketing of products to better diagnose and treat cancer and other
related immunologic diseases. The Company's current portfolio of products
provides the targeted delivery of diagnostic and therapeutic substances
directly to the sites of disease, as well as cellular therapies for the
treatment of cancer and infectious diseases. The Company's business objective
is to use patented and proprietary technologies to develop specific in vivo
cancer diagnostic imaging agents and targeted therapeutic products that
respond to unmet medical needs and can benefit patients with cancer and other
diseases. Its wholly-owned subsidiary, Cellcor, Inc. ("Cellcor"), a Delaware
corporation, is a biotechnology company. As used herein, the term "Company"
may mean CYTOGEN and its wholly-owned subsidiary, taken as a whole, where
appropriate.
Currently, the Company's highest priority products and technology are: (i)
OncoScint(R) CR/OV, CYTOGEN's monoclonal antibody-based diagnostic imaging
agent for colorectal and ovarian cancer, which has been approved by the U.S.
Food and Drug Administration ("FDA") for both single and repeat administration
(see "Cancer Diagnostic Imaging Products--OncoScint CR/OV"); (ii)
ProstaScint(TM), a prostate cancer diagnostic imaging product, for which a
Product License Application ("PLA") was accepted as filed by FDA in March 1995
(see "Cancer Diagnostic Imaging Products--ProstaScint"); (iii) Quadramet(TM),
also referred to by its chemical name, Samarium 153 EDTMP, a cancer therapy
agent for the treatment of bone pain associated with bone metastases, for
which a New Drug Application ("NDA") was accepted as filed by FDA in August
1995 (see "Cancer Therapeutic Products--Quadramet"); (iv) the Genetic
Diversity Library ("GDL") technology involving peptides that have potentially
significant commercial applications in the rapid screening of drug candidates,
in basic drug discovery programs, in in vitro diagnostics, as peptide-based
therapeutics, and in the discovery of synthetic genes or "SynGenes" (see
"Research and Development--Genetic Diversity Library Technology--
TSARs\SynGenes"); and (v) the autolymphocyte therapy ("ALT"), developed by
Cellcor for the treatment of advanced metastatic renal cell carcinoma
("mRCC"), which is in late Phase III development (see "Cancer Therapeutic
Products--ALT Therapy for mRCC").
The Company is continuing to evaluate, invest in and support the sales and
marketing activities with respect to OncoScint CR/OV, as well as the potential
marketing of ProstaScint and other technically-sophisticated tumor imaging
agents. See "Marketing and Sales--OncoScint CR/OV". The Company has also
assigned high priority to the product development and commercialization
programs for ProstaScint, Quadramet and ALT for the treatment of mRCC.
The Company's strategic plan calls for expanding the Company's current
product portfolio through the continued in-licensing of additional products
and related technologies, such as Quadramet, and the acquisition of other
companies with related or complementary products, technologies and/or
services, such as Cellcor. No prediction can be made, however, as to when or
whether CYTOGEN can accomplish this objective or whether accomplishment of the
objective will lead to new commercially-viable products or technologies.
In addition, CYTOGEN has committed additional resources to its GDL
technology, which, as a result of patent filings and development trends, was
previously referred to as 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 other existing products. CYTOGEN is pursuing corporate alliances and
basic research and development agreements in order to potentially validate and
partially fund the GDL technology programs. While several initial research
alliances were formed in 1995, there can be no assurance that these alliances
will be successful or that
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CYTOGEN will be successful in establishing such alliances and agreements in
the future. See "Research and Development--Genetic Diversity Library
Technology--TSARs\SynGenes".
The Company neither makes public forecasts regarding the timing or outcome
of FDA-related activities nor makes public predictions regarding the timing of
marketing partnerships. No assurance can be given regarding FDA approval or
the successful establishment of marketing agreements.
CANCER DIAGNOSTIC IMAGING PRODUCTS
Overview. Currently, the cancer diagnostic imaging products consist of
CYTOGEN's monoclonal antibody-based imaging agents for colorectal, ovarian,
prostate, and breast cancers. The Company's imaging products utilize CYTOGEN's
proprietary targeted delivery system, employing whole monoclonal antibodies,
to deliver the diagnostic radioisotope indium-111 to malignant tumor sites.
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.
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.
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,
commercially available diagnostic tests, including but not exclusive to
Computerized Tomography (CT) and Magnetic Resonance Imaging (MRI), 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 supported repeat administration of the product, and
submitted that data to FDA. In November 1995, FDA approved this expanded
indication allowing for repeat administration of Oncoscint CR/OV. Repeat
administration is an important next step for OncoScint, and may lead to a
modest increase in sales. See "Marketing and Sales--OncoScint CR/OV." With
respect to Europe, this data was also submitted to the Committee for
Proprietary Medicinal Products (the "CPMP"), which had approved OncoScint for
colorectal cancer in 1991. In December 1993, OncoScint CR/OV received CPMP
approval for repeat administration and ovarian cancer indications. Individual
member country approvals are required before marketing under these new
indications can be commenced. OncoScint CR/OV is now approved for sale in
eight Western European countries and four Eastern European countries.
Currently, OncoScint CR/OV is being marketed in the U.S. by CYTOGEN. 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. As a result, in
1994, the Company re-evaluated its relationships with its U.S. and European
distributors. 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. In December 1995 and January 1996, CYTOGEN signed
agreements with Faulding (Canada) Inc. ("Faulding") and CIS biointernational
("CISbio"), respectively, for the marketing of Oncoscint CR/OV outside the
U.S. See "Marketing and Sales--Faulding" and "CIS biointernational."
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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."
The breast cancer clinical development program, which involves the use of
OncoScint CR/OV to determine whether the cancer has spread to the lymph nodes
(i.e., beyond the primary tumor), was initiated in May 1995 as a result of
positive findings published by the Instituto Nazionale Tumori in Milan, Italy,
and is currently in a Phase II human clinical trial.
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 antibody utilized in ProstaScint was exclusively licensed to
CYTOGEN by Dr. Julius Horosziewicz. The product has been studied in three
different indications: presurgical, occult and repeat administration. The
Phase III clinical program for ProstaScint was completed in 1994 and the PLA
was filed by FDA in March 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
Quadramet. Quadramet has been 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 clinical development program for
Quadramet was completed in the first half of 1995. The Quadramet NDA was filed
by FDA in August 1995.
CYTOGEN entered into an exclusive license agreement for the U.S. rights to
Quadramet from The Dow Chemical Company in March 1993 and assumed
responsibility for the development and commercialization of the product at
that time. See Note 7 to the Consolidated Financial Statements. In December
1994, CYTOGEN granted to The DuPont Merck Pharmaceutical Company ("DuPont
Merck") an exclusive sub-license with respect to CYTOGEN's rights to
Quadramet. See "Marketing and Sales--Quadramet".
ALT Treatment for mRCC. ALT treatment for mRCC is a proprietary
immunotherapy which uses a patient's own white blood cells to augment his or
her immune system and thereby treat cancer and certain infectious diseases. In
October 1995, patient accrual for the Phase III pivotal clinical trial which
involves 203 patients, was completed. The Company expects that 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. In September of 1995, FDA approved a
Treatment IND for the ALT treatment of mRCC, which makes ALT available as a
treatment option to patients with mRCC who are not able to participate in ALT
clinical trials. The Treatment IND also allows Cellcor to recover costs
associated with the treatment. Cellcor is also conducting a Phase III human
clinical study in post-surgical patients with non-metastatic kidney cancer
with high risk of recurring disease. This study examines the effect of ALT in
delaying progression to metastatic disease. This study, which was conducted at
13 sites, completed patient accrual in 1995 and the patients are being
followed for survival status. A final analysis of this study is expected to be
available in late 1996. ALT is also in Phase I/II development as a treatment
for hepatitis B. No prediction can be made, however, as to whether or when
such trials will lead to new commercial products. See "Cellcor".
Cellcor is actively pursuing development and marketing collaborations in the
U.S. and Europe. No assurance can be given regarding the timing or success in
developing such collaborations.
Antibody-Based Cancer Therapeutics. CYTOGEN's efforts to develop antibody-
based, cancer therapeutics are currently limited to prostate therapy. This
product utilizes technology similar to the Company's diagnostic products.
However, in the therapeutic product, the substance linked to the antibody is a
radioisotope that destroys tumor cells.
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The therapeutic radioisotope that CYTOGEN uses, yttrium-90, is chemically
attached to the monoclonal antibody using CYTOGEN's proprietary technology. It
is intended that the therapy product 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 a
Phase II trial to determine the product's efficacy in patients with early
evidence of disease recurrence after radical prostatectomy. Development of the
ovarian therapy product, which completed Phase II clinical trials, has been
discontinued due to limited patient response to justify further support of the
product.
RESEARCH AND DEVELOPMENT
Genetic Diversity Library (GDL) Technology--TSARs\SynGenes. Long-term
research, much of which is preliminary, is being conducted by CYTOGEN on the
GDL technology, formerly referred to as TSARs\SynGenes. The GDL program
consists of research on long peptides that have the potential to take on 3-
dimensional structures. These peptides, which are biologically produced,
create vast, highly diverse compound libraries. Unlike conventional small
molecule drugs or short peptides, long peptides can act like proteins and can
fold to take on very precise biological functions such as specific recognition
units ("RUs"). Depending upon the application, these RUs can act as receptors,
as targeting agents, or ligands for biological receptors. In certain
applications, instead of administering the RU, it is more advantageous to
administer the synthetic gene ("SynGene") which encodes for the RU. Such
SynGene programs are at an early stage of pre-clinical development.
Additionally, CYTOGEN believes its GDL technology can serve as a complementary
and enabling technology to support advances in combinatorial chemistry.
Combinatorial chemistry, which allows for much more rapid synthesis of new
compounds is currently hampered by the lack of equally rapid screening methods
that can begin to characterize each compound's potential therapeutic value.
Currently, CYTOGEN is working, independently and in collaboration with others,
to develop this technology into several potential commercial applications: in
the rapid screening of drug candidates; in basic drug discovery and the
development of peptide therapeutics; in in vitro diagnostics; and in the
discovery of SynGenes.
CYTOGEN is the exclusive licensee of certain patent applications and
technology owned by the University of North Carolina at Chapel Hill covering
the GDL technology. CYTOGEN has filed patent applications in the U.S. and
certain foreign countries with respect to its GDL technology.
While a significant amount of basic research on the GDL 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. CYTOGEN is actively pursuing corporate alliances and basic research
agreements to support and advance the GDL technology toward commercialization.
In December 1995, CYTOGEN and Elan Corporation, plc ("Elan") established a
collaborative research and development program to develop orally-administered
products using CYTOGEN's GDL technology and Elan's drug delivery system
technology. See "Limited Field of Use License Agreements--Elan" and Note 3 to
the Consolidated Financial Statements.
Two additional collaborations are also underway: the first, is in support of
in vitro diagnostics and the second involves the pre-clinical evaluation of
certain monoclonal antibodies and corresponding GDL-derived peptides which may
lead to the identification of novel immunotherapies for cancer. No assurances
can be given regarding the success or timing of these or future research and
development programs.
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, CYT-351. 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.
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. The
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Company intends to expand the research and development of these technologies
primarily through strategic alliances with other entities. No predictions can
be made regarding the establishment nor the timing of such alliances. The
Company 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 the Company include
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 $22.6 million, $20.3
million and $24.8 million in fiscal years 1995, 1994, and 1993, 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 $200,000, $29,000 and
$9,112,000 in fiscal years 1995, 1994, and 1993, respectively.
MARKETING AND SALES
OncoScint CR/OV. Promotion of OncoScint CR/OV involves several different
physician audiences, including those who refer patients for imaging procedures
as well as 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 sub-specialty 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 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."
In December 1995 and January 1996, CYTOGEN signed two marketing agreements for
Oncoscint CR/OV outside of the U.S. with Faulding and CISbio. See "Faulding
(Canada) Inc." and "CIS biointernational."
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. The Company believes that this
information regarding the existence, location and extent of disease has the
potential to impact a physician's ability to make appropriate patient
management decisions. The potential for OncoScint to reduce the number of
unnecessary surgeries and the costs associated with such surgery are seen as
significant benefits in today's cost-conscious "managed health care" settings.
CYTOGEN believes that sales of OncoScint CR/OV may be modestly increased
because of the approval of repeat administration (described below),
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 in the process of 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 (ACNP). This
program is being further developed in preparation for the launch of the
Company's prostate cancer imaging agent, ProstaScint.
CYTOGEN is also exploring the use of teleradiology to support the PIE
Program in order to allow for improvement of the acquisition and
interpretation of both OncoScint CR/OV and ProstaScint scans. Teleradiology
can provide immediate, two-way communications by linking an imaging center
with an off-site imaging specialist. The use of teleradiology has advanced due
to improvements in related computer and telecommunication technologies.
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The Company is also exploring whether other companies with comparable
technique-dependent products would like to take advantage of the PIE Program,
which would allow allocation of the marketing and sales costs over a number of
different products. While there has been a great deal of interest in the PIE
Program from other companies, there can be no assurance that CYTOGEN can
attract other products to the PIE Program, that the Company's marketing
strategy will be successful, or that product related revenues will increase
markedly.
In November 1995, CYTOGEN announced that FDA approved the Company's PLA
supplement, expanding the approved indications for OncoScint CR/OV to include
repeat administration of the product. The initial FDA approval received in
December 1992 limited the product to a single administration indication. The
approved supplement extends the prior indication to include readministration
of OncoScint CR/OV to human anti-mouse antibody ("HAMA")-negative patients who
are at risk of recurrence of their cancer. HAMA formation represents an immune
response experienced by some patients when injected with a mouse-derived
antibody that may affect the effectiveness of the product.
Knoll Pharmaceutical. In November 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"). See Note 6 to the Consolidated Financial Statements. 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 each of
those fiscal years, the Company also recognized revenues from the supply of
commercial product to Knoll by the Company.
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 reacquisition
was consummated on February 16, 1995. See Note 11 to the Consolidated
Financial Statements. The Company recognized contract and product related
revenues from Chiron of $3,000, $162,000 and $164,000 in fiscal years 1995,
1994 and 1993, respectively.
Faulding. 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. Pursuant to the terms of the Faulding Agreement,
in addition to an up-front cash payment made upon executing the Faulding
Agreement, Faulding is required to make an additional payment to CYTOGEN upon
the receipt of certain regulatory approvals. The Faulding Agreement also
provides for payments for minimum annual purchases of OncoScint CR/OV by
Faulding, and for certain royalties based upon net sales, if any, of OncoScint
CR/OV by Faulding. The initial term of the Faulding Agreement is seven years.
CIS biointernational. 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 in eight Western European and four
Eastern European countries where the product is approved for marketing, during
1996, and, pursuant to the terms of the CISbio Agreement, CISbio is required
to obtain the necessary regulatory approvals in an additional twenty-two
countries. Pursuant to the terms of the CISbio Agreement, in addition to an
up-front cash payment made upon executing the CISbio Agreement, CISbio is
required to make an additional payment to CYTOGEN upon the achievement of a
specified marketing milestone. The CISbio Agreement also provides for minimum
annual purchases of the components of OncoScint CR/OV by CISbio, and for
certain royalties based upon net sales, if any, of OncoScint CR/OV by CISbio.
The initial term of the CISbio Agreement is seven years following the first
commercial sale of the product by CISbio.
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QUADRAMET
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 an exclusive sub-license with
respect to CYTOGEN's rights to Quadramet pursuant to which DuPont Merck will
have responsibility for manufacturing and marketing Quadramet in the U.S., if
and when approved for marketing by FDA. The Company has retained the right to
co-promote the product to nuclear medicine specialists. See "Cancer
Therapeutic Products--Quadramet" and Note 4 to the Consolidated Financial
Statements.
The DP/Merck Agreement provides that CYTOGEN receives 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 Quadramet, of which $1.3 million was received
in 1995, (iv) a $2.0 million milestone payment if and when Quadramet 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 connection with a public offering for CytoRad units, which
commenced in February 1992, 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 of
contract revenues in fiscal year 1993, in addition to $2.0 million in up-front
license fees received from CytoRad in fiscal year 1993.
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 year 1993, funds provided under those
agreements represented the principal source of funding for the development of
the products involved.
On November 15, 1994, CYTOGEN and CytoRad executed an Agreement and Plan of
Merger (the "CytoRad Merger Agreement") to purchase all of CytoRad's
outstanding units. Pursuant to the CytoRad Merger Agreement, on January 20,
1995, CYTOGEN commenced an exchange offer 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 27, 1995, CYTOGEN completed its acquisition of CytoRad by
merging CytoRad with and into a wholly-owned subsidiary of CYTOGEN pursuant to
the CytoRad 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 CytoRad Merger Agreement.
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As a result of the acquisition, CYTOGEN reacquired all rights it had
previously licensed to CytoRad. In addition, as a result of the merger, $11.7
million of CytoRad's cash and securities, before payment of certain of
CYTOGEN's transaction costs, were acquired by the Company.
On February 29, 1996, CYTOGEN announced that the CVRs had terminated by
their terms and were of no further value. Accordingly, CYTOGEN no longer has
an obligation to issue shares of its common stock to holders of CVRs on
January 31, 1997.
MERGER WITH CELLCOR
In June 1995, CYTOGEN entered into an Agreement and Plan of Merger, as
amended (the "Merger Agreement"), with Cellcor, Inc. ("Cellcor") and a wholly-
owned subsidiary of CYTOGEN (the "Merger Subsidiary"), which provided that
Cellcor would be merged with and into the Merger Subsidiary (the "Cellcor
Merger"), whereupon the separate corporate existence of Cellcor would cease
and the Merger Subsidiary would change its name to Cellcor, Inc. Hillman
Medical Ventures partnerships and certain of their affiliates (collectively,
the "Cellcor Principal Stockholders") owned 46.5% of the Cellcor common stock
and 95.2% of the Cellcor preferred stock. The Cellcor Principal Stockholders
agreed to vote such shares in favor of the Cellcor Merger pursuant to a Voting
and Subscription Agreement (the "Voting Agreement").
In connection with the Cellcor Merger, each holder of Cellcor common stock
was granted the non-transferable right to purchase 1.118 shares of CYTOGEN
common stock for each share of Cellcor common stock held by such holder at the
close of business on August 17, 1995, at a price of $3.89 per share of CYTOGEN
common stock (the "Subscription Offering"). Certain of the Cellcor Principal
Stockholders purchased $11.5 million of the shares in the Subscription
Offering.
On October 16, 1995, CYTOGEN's stockholders approved the issuance of
securities necessary to effect the acquisition of Cellcor and the Subscription
Offering. On October 20, 1995, CYTOGEN completed its acquisition of Cellcor by
merging Cellcor with and into the Merger Subsidiary. At that time, each
outstanding share of Cellcor common stock was converted into the right to
receive 0.60 shares of CYTOGEN common stock and each outstanding share of
Cellcor Convertible Preferred Stock was converted into the right to receive
218.94 shares of CYTOGEN common stock. As a result of the Cellcor Merger,
CYTOGEN (i) issued 4,713,564 shares of common stock to acquire Cellcor (see
Note 1 to the Consolidated Financial Statements), (ii) issued 5,144,388 shares
of common stock in connection with the Subscription Offering, which raised a
total of $20.0 million (including the $11.5 million purchased by the Cellcor
Principal Stockholders) and (iii) reserved for issuance up to 613,694 shares
of common stock issuable upon the exercise of Cellcor stock options and
warrants assumed by CYTOGEN in the Cellcor Merger. Pursuant to the terms of
the Voting Agreement, the Cellcor Principal Stockholders have also agreed that
they will not contract to sell, sell or otherwise transfer any shares of
CYTOGEN common stock received by them in the Cellcor Merger or purchased by
them in the Subscription Offering for a period of two years following the
effective date of the Cellcor Merger. On the second anniversary of the Cellcor
Merger and each six month anniversary thereafter, the Cellcor Principal
Stockholders may so sell or transfer one third of the shares so acquired.
The Cellcor Merger reflects the Company's strategy to build its business
through, among other things, strategic acquisitions that add complementary
products, technologies and services to CYTOGEN's existing portfolio. In
particular, the Company has added Cellcor's proprietary ALT products and
supportive core competencies in ex vivo cell processing to its product
pipeline. See "Cancer Therapeutics Products--ALT Treatment for mRCC".
LIMITED FIELD OF USE LICENSE AGREEMENTS
In addition to development of its own proprietary products, CYTOGEN and
Cellcor have entered into limited field of use licenses for rights in their
proprietary technology with various pharmaceutical companies in the U.S.,
Europe, and Japan. Although the terms of each agreement differ, these
agreements generally provide
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for royalty payments to the Company 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 the
Company.
Elan. In December 1995, CYTOGEN entered into a Research and Development and
Option agreement with Elan (the "Elan Agreement") under which both parties
will implement a research program that combines CYTOGEN's GDL technology with
Elan's drug delivery system technology. Joint research, conducted by the
companies' scientists, will exploit GDL-derived peptides that have the ability
to target drugs to specific sites within the body. Initial research will focus
on the development of products that can be administered orally and pass
through the gastrointestinal tract, utilizing specific intestinal cell surface
receptors identified by Elan's research team as being best suited to
facilitate uptake and absorption of the drug. Under the Elan Agreement, Elan
has been granted an option for exclusive worldwide licensing rights to any
products developed collaboratively and the Company will receive royalties
based on sales, if any, of such products. The Elan Agreement states that the
parties anticipate that the research program will continue for an initial
period of sixteen months but may be extended for up to an additional one year
period by Elan. Elan will provide the funding necessary for both companies to
fulfill their respective obligations, with the total cost for the initial
period of the research program not to exceed $3.0 million, of which not more
than $1.5 million will be paid to the Company.
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 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.
SRL, Inc. In March 1994, Cellcor announced the signing of a non-exclusive
technology licensing and service agreement with SRL, Inc. ("SRL"), a Japanese
diagnostic firm. Under the agreement (the "SRL Agreement"), SRL has the right
to select from several development options. Varying payments are due to
Cellcor depending on the option SRL elects. At this time, the Company expects
that it is unlikely that SRL will elect an option that will have a significant
impact on its operations or capital needs and there can be no assurance that
SRL will elect any development options in the future.
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. In November 1995, FDA proposed new
reforms that would eliminate the requirement that "well-characterized biologic
products" be commercially manufactured in an ELA-approved facility. Therefore,
while CYTOGEN will be required to maintain Good Manufacturing Practices
("GMP"), under the proposed reforms, it will not be required to obtain
regulatory approval for all of its commercial manufacturing processes and
facilities. Moreover, under the proposed reforms, CYTOGEN will retain the
status of having met FDA ELA requirements and performance standards, which it
believes is an important competitive advantage and one it is using to attract
additional contract manufacturing business. To date, CYTOGEN has had two
contract manufacturing customers for which it is manufacturing clinical
supplies.
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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 filed by FDA in March 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 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.
Cellcor has established a GMP manufacturing facility for patient-specific
cell processing in a high volume setting, suitable for commercial-scale
production. Cellcor will pursue opportunities to develop contract
manufacturing relationships with other biotechnology companies and academic
institutions in the field of patient specific ex vivo cell processing.
RAW MATERIALS
The raw materials used in the manufacture of the Company'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,
Celltech Limited, 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 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.
Cellcor's cellular therapies require the use of devices and materials
manufactured by third parties, which Cellcor seeks to maintain multiple
sources for. Cellcor relies on a single source of supply for an important
monoclonal antibody used in the cell processing procedures. There can be no
assurance that products or devices necessary to implement the Company's living
cell therapies will be continuously available or available upon terms
favorable to the Company in the future.
HUMAN RESOURCES
As of December 31, 1995, the Company employed 153 persons full-time, of whom
45 were engaged in research and development activities, 40 were engaged in
operations and manufacturing, 21 were engaged in administration and
management, 18 were engaged in selling and marketing and 29 were engaged in
Cellcor's operations. Of the Company's employees, 25 hold Ph.D. and/or M.D.
degrees, and 18 hold other advanced degrees. The Company, from time to time,
hires scientific consultants to work on certain of its research and
development programs. The Company believes that it has been successful in
attracting skilled and experienced scientific personnel; however, competition
for such personnel is intense.
None of the Company's employees is covered by a collective bargaining
agreement. All of the Company's employees have executed confidentiality
agreements. The Company considers relations with its employees to be
excellent.
PATENTS AND PROPRIETARY RIGHTS
Consistent with industry practice, the Company 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 the Company's proprietary
technology.
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The Company'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.
CYTOGEN holds 13 current U.S. patents and 52 current foreign patents.
CYTOGEN has filed and currently has pending 21 U.S. patent applications and 24
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.
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's U.S. Patent No. 5,162,504, entitled "Monoclonal Antibodies to a
New Antigenic Marker in Epithelial Prostate Cells and Serum of Prostate Cancer
Patients," provides protection for the monoclonal antibody 7E11-C5, the
targeting agent used in ProstaScint.
Cellcor holds 3 current U.S. patents. Cellcor has filed and currently has
pending 4 U.S. patent applications and 2 foreign patent applications.
Additional patent protection is being actively pursued for Cellcor related
proprietary technology.
CYTOGEN is the exclusive licensee of certain patent applications held by the
University of North Carolina at Chapel Hill covering GDL 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 Quadramet.
CYTOGEN may be entitled under certain circumstances to seek extension of the
terms of its patents. See "Government Regulation and Product Testing--FDA
Approval".
The Company 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. The Company
typically enters into confidentiality agreements with its licensees and any
scientific consultants, and each of CYTOGEN's and Cellcor's employees have
entered into agreements with the companies requiring that they forbear from
disclosing confidential information of the companies, and assign to the
companies all rights in any inventions made while in their employ. The Company
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
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be issued to CYTOGEN or Cellcor in any or all appropriate jurisdictions, (ii)
litigation will not be commenced seeking to challenge the patent protection or
such challenges will not be successful, (iii) the Company's processes or
products do not or will not infringe upon the patents of third parties, or
(iv) the scope of patents issued will successfully prevent third parties from
developing similar and competitive products. It is not possible to predict how
any patent litigation will affect the Company's efforts to develop,
manufacture or market its products.
The technology applicable to the Company's products is developing rapidly. A
substantial number of patents have been issued to other 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 the Company. In
addition, others may have filed patent applications and may have been issued
patents to products and to technologies potentially useful to the Company or
necessary to commercialize its products or achieve its business goals. There
can be no assurance that the Company will be able to obtain licenses of such
patents on terms acceptable to the Company. See "Competition."
OncoScint is a registered trademark of CYTOGEN. ProstaScint, PIE and SynGene
are trademarks of CYTOGEN, pending registration. Quadramet is a trademark of
Dow, licensed to CYTOGEN.
GOVERNMENT REGULATION AND PRODUCT TESTING
The development, manufacture and sale of medical products utilizing the
Company'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 the Company 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.
Together with approval of its ELA with respect to its manufacturing facility
in New Jersey, CYTOGEN received initial FDA approval in December 1992 to
market OncoScint CR/OV in the U.S. under a single administration indication.
The Company received repeat administration approval in November 1995.
Difficulties or unanticipated costs may be encountered by the Company or its
licensees in their respective efforts to secure necessary governmental
approval or licenses, which could delay or preclude the Company 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 the Company 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
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.
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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 and cancer
therapeutic 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 which do not meet the definition of
"well-characterized biologic products." 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.
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. The Company 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. FDA has established a process called the Treatment
Investigational New Drug ("IND") which makes investigational drugs available
for the treatment of patients with a serious or life-threatening disease. For
investigational drugs to be eligible for a Treatment IND program, there can be
no comparable or satisfactory alternative drug or therapy available to treat
the particular disease in the intended patient population. In September 1995,
FDA approved a Treatment IND program for ALT to be available as a treatment
option to patients with mRCC who were not able to participate in ALT clinical
trials. The Treatment IND also allows Cellcor to charge patients for the cost
of the treatment. Cellcor has also received authorization from FDA for cost
recovery related to the treatment of patients receiving ALT for mRCC under a
compassionate use protocol. The only patients who are eligible to participate
in this program are patients who have already received six or more treatments
in a commercial or research setting. Cellcor was treating approximately 20
patients under this protocol at the end of 1995.
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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, the Company
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, the Company 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, medical device companies and research institutions, many of
which have substantially greater capital resources, marketing experience,
research and development staffs and facilities than the Company. 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 the Company to develop, refine and market
products based on monoclonal antibody-based technology, immunotherapy, or on
other technologies applicable to the diagnosis and treatment of cancer such as
CT, MRI, and chemotherapeutic products. The Company is aware that several
companies are engaged in the development of technology and products for
targeted radioisotopic and drug delivery, and cellular and gene therapies. The
Company understands that certain of these competitors are in the process of
conducting human clinical trials, have filed applications for marketing
approval by government agencies, or have received marketing approval by
government agencies of certain products which will compete with the Company'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.
CUSTOMERS
In fiscal year 1995, the Company received 78% of its total product related,
license and contract revenues from three (3) customers: $2.0 million from Dow
(see Note 7 to the Consolidated Financial Statements);
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$1.3 million from DuPont Merck (see "Marketing and Sales--Quadramet" and Note
4 to the Consolidated Financial Statements); and $621,000 from Medi-Physics,
Inc., a chain of radiopharmacies.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Princeton, New Jersey.
CYTOGEN currently leases approximately 107,700 square feet of administrative,
laboratory and manufacturing space in three locations in Princeton. The lease
for its 56,900 square foot laboratory and manufacturing facility in Princeton
will expire on February 28, 2003 and provides two 5-year renewal options.
CYTOGEN has sub-leased 8,715 square feet of the laboratory facility to another
company. This sub-lease will expire on April 30, 1996. The lease for CYTOGEN's
31,400 square foot office space in Princeton will expire on June 15, 1997,
subject to CYTOGEN's right to renew through June 15, 2002. CYTOGEN also leases
an additional 19,400 square feet at a third location in Princeton, under a
lease which will expire in December 1999. This third location is used for
laboratories and support for production of commercial product. CYTOGEN expects
to remain in the Princeton area for the foreseeable future. As of December 31,
1995, the Company had invested approximately $9.8 million for improvements in
these buildings it occupies.
Cellcor leases 21,500 square feet in Newton, Massachusetts, which houses all
of Cellcor's administrative staff and research and operations groups. The
lease for this facility will expire on February 29, 2000. Approximately 25% of
the facility has been sub-leased to another company under a short-term lease
arrangement.
The Company leases some of the equipment used in its laboratory and
manufacturing facility. See Notes 11 and 18 to the 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 April 24, 1995, Cellcor announced that it had agreed to settle a
stockholder class action suit brought by William L. Glosser, as representative
of a class of Cellcor's stockholders, against Cellcor, Cellcor's directors and
Furman Selz Incorporated, individually and as the representative of the 26
underwriters of Cellcor's initial public offering. The suit was originally
filed in the Court of Chancery of Delaware on September 18, 1992 and alleged
certain securities law violations.
At a hearing held on December 21, 1995, an Order and Final Judgment was
entered by Chancellor Allen, the Court of Chancery of Delaware, approving the
settlement between the parties, which provided for a $700,000 cash payment
(which includes approximately $300,000 of fees and expenses of plaintiff's
counsel) to the members of the plaintiff class in return for dismissal of all
claims against the defendants. Cellcor's insurance carriers paid over $440,000
towards the settlement and Cellcor paid the balance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 16, 1995, CYTOGEN held a special meeting of stockholders to
approve the issuance of the CYTOGEN's securities necessary to effect the
acquisition of Cellcor and to undertake a Subscription Offering to Cellcor
stockholders. The following table sets forth information regarding the number
of votes cast for, against, abstentions, as well as the number of broker non-
votes with respect to the approval of the issuance of CYTOGEN's securities:
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTENTIONS NON-VOTES
--- ------- ----------- ---------
<S> <C> <C> <C>
16,496,706 597,185 212,336 0
</TABLE>
16
<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, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William C. Mills III 40 Chairman of the Board
Thomas J. McKearn 47 Chief Executive Officer and President
T. Jerome Madison 55 Vice President, Finance, Chief Financial Officer
and Secretary
L. Michael Hinds 54 Vice President, Marketing and Sales
Robert T. Maguire 45 Vice President, Medical Affairs
Frederick M. Miesowicz 47 Vice President and Vice President and
General Manager of Cellcor
Richard Murawski 47 Vice President, Operations
Pamela M. Murphy 45 Vice President, Corporate Communications
Charles W. Ogelsby 52 Corporate Controller and Assistant Secretary
John D. Rodwell 49 Vice President, Research and Development
Richard J. Walsh 52 Vice President, 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 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 Board 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 and Chief Financial Officer and Secretary. He has been a director of
the Company since December 1994. Mr. Madison is the sole stockholder, and an
officer and director of Somerset Central Corporation, a New Jersey 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.,
(now Rhone-
17
<PAGE>
Poulenc Rorer). Mr. Madison holds a B.S. from The Wharton School of the
University of Pennsylvania and an M.B.A. from Monmouth University. He is also
a Certified Public Accountant.
L. Michael Hinds joined the Company in October 1995 as Vice President,
Marketing and Sales. From 1981 until he joined the Company, Mr. Hinds held a
variety of management positions at Picker International, Inc., a diagnostic
imaging company, serving as Vice President, Western Europe from 1991 to 1994,
and Vice President, International from 1983 to 1991. Mr. Hinds holds a B.A.
degree from the University of Bordeaux and a Ph.D. in international economics
from the University of Paris.
Robert T. Maguire joined the Company in June 1987. He served as Director,
Clinical Investigations and Vice-President, Clinical Investigations of the
Company until September 1995, at which time he was elected Vice President,
Medical Affairs. Prior to joining the Company, Dr. Maguire held the position
of Director, Clinical Research at Wyeth Laboratories. From 1979 to 1983, Dr.
Maguire was a Clinical Associate in the Pediatric Oncology Branch, Laboratory
of Chemical Pharmacology and the Laboratory of Carcinogen Metabolism at the
National Cancer Institute. Dr. Maguire holds an A.B. degree from Princeton
University and an M.D. degree from Temple University Medical School.
Frederick M. Miesowicz joined the Company in October 1995 as Vice President
of the Company. He also serves as Vice President and General Manager of
Cellcor. Prior to joining the Company, Dr. Miesowicz served as Cellcor's
Senior Vice President of Scientific Affairs since October 1992. Dr. Miesowicz
has an extensive background in cellular therapies. Prior to joining Cellcor,
he managed the United States and European SteriCell Division of Terumo Medical
Corp. and was with E.I. DuPont de Nemours & Company for over 14 years. In
1986, he assumed development responsibility for DuPont's cellular therapy
business, working with the National Cancer Institute and others on ex vivo
immunotherapies (lymphokine activated killer cells and tumor infiltrating
lymphocytes for cancer). He holds a B.S. in Chemistry from Siena College and a
Ph.D. in Chemistry from Harvard University.
Richard Murawski joined the Company in April 1994 as Vice President,
Operations. Mr. Murawski served as Vice President, Operations of 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 healthcare 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, 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 Pharmaceuticals. 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.
Charles W. Ogelsby joined the Company in November 1993 as Controller. He was
elected Corporate Controller in 1994 and Assistant Secretary in 1995. From
1990 until he joined the Company, Mr. Ogelsby served as President of Ogelsby &
Company, a Bryn Mawr, Pennsylvania financial consulting firm providing
strategic, operating, financial and accounting services to small companies.
From 1988 through 1990, Mr. Ogelsby was Vice President of Founders Court, a
venture capital firm. Mr. Ogelsby is a Certified Public Accountant and a
member of both the American and Pennsylvania Institutes of Certified Public
Accountants. He holds B.S. and M.B.A. degrees from Temple University.
John D. Rodwell joined the Company in September 1981. He served as Director,
Chemical Research and then as Vice President, Discovery Research, from 1984
until January 1989, at which time he assumed his present
18
<PAGE>
responsibilities as Vice President, Research and Development. 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. Dr. Rodwell is
a director and treasurer of the Diversity Biotechnology Consortium located in
Sante Fe, New Mexico, which funds basic research in the area of molecular
diversity. He holds a B.A. degree from the University of Massachusetts, an
M.S. degree in Organic Chemistry from Lowell Technological 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,
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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
CYTOGEN Common Stock is traded on the NASDAQ National Market under the
trading symbol "CYTO." The table below sets forth the high and low sale prices
for CYTOGEN Common Stock for each of the calendar quarters indicated, as
reported by the NASDAQ National Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1994
First Quarter............................................... 7 3
Second Quarter.............................................. 6 1/2 2 7/8
Third Quarter............................................... 5 3/4 3
Fourth Quarter.............................................. 4 1/4 2 3/8
1995
First Quarter............................................... 5 1/4 3 1/16
Second Quarter.............................................. 5 1/4 2 15/16
Third Quarter............................................... 6 1/2 4 1/4
Fourth Quarter.............................................. 5 15/16 3 17/32
</TABLE>
As of February 22, 1996 there were approximately 6,522 holders of record of
the Common Stock.
CYTOGEN 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.
19
<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, 1995, which have been audited by Arthur Andersen
LLP, the Company'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>
1995(1) 1994 1993 1992 1991
-------------------- --------- --------- ---------
(All amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues.............. $ 4,985 $ 2,458 $ 10,354 $ 13,367 $ 7,022
--------- --------- --------- --------- ---------
Research and
development.......... 22,594 20,321 24,844 21,680 21,293
Selling and marketing. 4,493 5,536 9,399 2,679 1,290
Acquisition of
technology and
marketing rights..... 45,878 4,647 -- -- --
General and
administrative....... 4,804 3,962 7,016 5,394 3,612
--------- --------- --------- --------- ---------
Operating expenses.... 77,769 34,466 41,259 29,753 26,195
Loss from operations.. $ (72,784) $ (32,008) $ (30,905) $ (16,386) $ (19,173)
Non-operating income
(expense)............ 264 (798) 1,676 3,447 3,829
--------- --------- --------- --------- ---------
Net loss.............. (72,520) (32,806) (29,229) (12,939) (15,344)
Dividends on preferred
stock................ -- -- -- (1,293) (1,725)
--------- --------- --------- --------- ---------
Net loss to common
stockholders......... $ (72,520) $ (32,806) $ (29,229) $ (14,232) $ (17,069)
========= ========= ========= ========= =========
Net loss per common
share................ $ (2.11) $ (1.38) $ (1.38) $ (0.75) $ (0.98)
========= ========= ========= ========= =========
Weighted average
common shares
outstanding.......... 34,333 23,822 21,121 18,994 17,345
========= ========= ========= ========= =========
CONSOLIDATED BALANCE
SHEETS DATA:
Cash and short term
investments.......... $ 28,752 $ 7,700 $ 23,764 $ 35,738 $ 54,506
Total assets.......... 37,149 19,690 34,635 52,775 64,471
Long term liabilities. 3,275 4,310 192 276 346
Redeemable preferred
stock................ -- -- -- -- 17,250
Redeemable common
stock................ -- 2,000 2,000 2,000 2,000
Stockholders' equity.. 25,276 4,368 21,731 45,411 38,760
</TABLE>
- --------
(1) Results of Operations and Balance Sheets Data includes information related
to Cellcor, Inc. for the period beginning October 20, 1995 to December
31,1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
From time to time, as used herein, the term "Company" may include CYTOGEN
Corporation ("CYTOGEN") and its wholly-owned subsidiary Cellcor, Inc.
("Cellcor") taken as a whole, where appropriate.
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
relate to the fiscal year ended January 1, 1994.
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
20
<PAGE>
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 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.
During 1994, because of a contractual dispute between CYTOGEN and CytoRad
Incorporated ("CytoRad"), no contract revenues were recorded by CYTOGEN for
research services performed on behalf of CytoRad, although CYTOGEN continued
with the development of the products licensed to CytoRad. In 1995, CYTOGEN
acquired CytoRad by merging CytoRad with and into a wholly-owned subsidiary of
CYTOGEN. See Note 5 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, in 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 1994, CYTOGEN entered into a license agreement (the "DP/Merck
Agreement") with The DuPont Merck Pharmaceutical Company ("DuPont Merck")
pursuant to which DuPont Merck will have responsibility for manufacturing and
marketing Quadramet in the U.S., if and when approved for marketing by the
U.S. Food and Drug Administration ("FDA"). The Company has retained the right
to co-promote the product to nuclear medicine specialists. Pursuant to the
DP/Merck Agreement, CYTOGEN received from DuPont Merck an up-front cash
payment of $1.0 million in December 1994 and $5.3 million in January 1995, of
which $1.3 million is 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. See Note 4 to the Consolidated Financial Statements. The
New Drug Application ("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.
Beginning in July 1994, as a result of the termination of CYTOGEN's
relationship with Knoll Pharmaceuticals Company ("Knoll"), product related
revenues have included product sales by CYTOGEN to its U.S. customers. See
Note 6 to the Consolidated Financial Statements. Since that date, CYTOGEN has
not recorded any product sales to Knoll or any co-promotion revenues. In
addition, in December 1994, CYTOGEN 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") to reacquire
the exclusive marketing and distribution rights to OncoScint CR/OV in Europe
(the "European Rights") previously granted to Chiron. This reacquisition was
consummated in February 1995 and since that date, OncoScint CR/OV has not been
marketed outside the U.S. See Note 11 to the Consolidated Financial
Statements.
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 single
administration indication to include readministration of OncoScint CR/OV to
human anti-mouse antibody-negative patients who are 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 in the process of establishing a network of
qualified nuclear
21
<PAGE>
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, although the timing and outcome of FDA's decision regarding
ProstaScint cannot be predicted by the Company. In addition, CYTOGEN is
exploring the use of teleradiology to support the PIE Program in order to
allow for improvement of the acquisition and interpretation of both OncoScint
CR/OV and ProstaScint scans. In its strictest form, teleradiology provides
two-way communications by linking an imaging center with an off-site imaging
specialist. The use of teleradiology has advanced due to improvements in
related computer and telecommunication technologies. The Company is also
exploring whether other companies with their own technique-dependent products
would like to participate in the PIE Program, which would allow allocation of
the marketing and sales costs over a number of different products. While there
has been interest in the PIE Program from other companies, there can be no
assurance that CYTOGEN can attract other products to the PIE Program, that
this marketing strategy will be successful or that product related revenues
will increase markedly.
In December 1995 and January 1996, CYTOGEN entered into agreements with
Faulding (Canada) Inc. ("Faulding") and CIS biointernational ("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 October 1995, CYTOGEN completed its acquisition of Cellcor by merging
Cellcor with and into a wholly-owned subsidiary of CYTOGEN. See Note 2 to the
Consolidated Financial Statements. Cellcor is a biotechnology company focused
on the development and commercialization of autolymphocyte therapy ("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 is also conducting a Phase III human clinical study in post-
surgical patients with non-metastatic kidney cancer with high risk of
recurring disease to examine the effect of ALT in delaying progression to
metastatic disease. ALT is also in Phase I/II development as a treatment for
chronic hepatitis B. No prediction can be made, however, as to when or whether
such trials will lead to new commercial products.
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. In addition, 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.
Revenues. Total revenues were $5.0 million in 1995, $2.5 million in 1994 and
$10.4 million in 1993. Product related revenues were $1.4 million in 1995 and
consisted primarily of domestic sales of OncoScint CR/OV. In 1994, product
related revenues from sales of OncoScint CR/OV were $1.4 million 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.
22
<PAGE>
License and contract revenues for 1995, 1994, and 1993 were $3.6 million,
$1.0 million and $8.8 million, respectively, and included milestone payments
of $2.1 million in 1995, $1.0 million in 1994 and $2.0 million in 1993. The
1995 milestone payments consisted primarily of $2.0 million from The Dow
Chemical Company ("Dow"), which was received upon the Company's filing of the
NDA with FDA. In 1994, CYTOGEN received a $1.0 million milestone payment from
DuPont Merck upon its entering into an agreement with CYTOGEN to manufacture
and market Quadramet in the U.S. See Note 4 to the Consolidated Financial
Statements. In 1993, CYTOGEN received a milestone payment of $2.0 million from
CytoRad as a one-time licensing fee for rights to CYTOGEN's ovarian cancer
radiotherapy product and related technology. Revenues from the sale of
research services were $1.5 million in 1995 compared to $47,000 in 1994 and
$6.8 million in 1993. The decrease in 1995 and 1994 from 1993 is attributable
primarily to the absence of contract revenues from CytoRad. The 1995 contract
revenues consisted primarily of $1.3 million realized from DuPont Merck for
continued clinical development of Quadramet. In 1994, CYTOGEN recorded an
aggregate of $47,000 of contract revenues from Bracco (defined below) and
Chiron. In 1993, CYTOGEN recorded $5.9 million of contract revenues from
CytoRad in addition to the licensing fee from CytoRad and $900,000 from Bracco
as defined below.
Operating Expenses. Total operating expenses were $77.8 million in 1995,
$34.5 million in 1994, and $41.3 million in 1993. The increase of $43.3
million from 1994 to 1995 is largely attributable to the one-time non-cash
charges of $45.9 million recorded in 1995 for acquisition of technology and
marketing rights from CytoRad and Cellcor, compared to the $4.6 million in
charges recorded in 1994 for acquisition of marketing and technology rights
from Knoll, Chiron, and CytoRad. In addition, in 1995, the Company recorded a
$2.9 million charge for inventory writedowns of commercial inventory relating
to OncoScint CR/OV, compared to a $1.1 million charge in 1994. The 1995 and
1994 spending levels, excluding the above mentioned one-time charges, are
relatively the same but below the 1993 level, reflecting 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 were $22.6 million in 1995, $20.3 million
in 1994 and $24.8 million in 1993. These expenses principally reflect product
development efforts and support for various ongoing clinical trials and in
1995, included costs incurred in connection with the submissions of the PLA
for ProstaScint and NDA for Quadramet. During 1995, 1994, and 1993, the
Company charged $2.9 million, $1.1 million and $2.3 million, respectively, to
research and development expenses for inventory writedowns of commercial
inventory relating to OncoScint CR/OV.
Selling and marketing expenses were $4.5 million in 1995, $5.5 million in
1994 and $9.4 million in 1993. The decrease from the prior year periods is
primarily attributable to the reduction of promotional expenses associated
with OncoScint CR/OV and in 1995, included the reduction of salaries and
employee related expenses that resulted from the restructuring of CYTOGEN's
sales force.
Acquisition of technology and marketing rights expenses were $45.9 million
in 1995 and included $19.7 million and $26.2 million of one-time non-cash
charges representing the amounts by which the purchase prices exceeded the
fair value of net assets acquired in connection with the CytoRad and Cellcor
mergers, respectively. In 1994, CYTOGEN recorded $4.6 million for acquisition
of technology and marketing rights, which included $2.4 million and $800,000
of one-time charges for the acquisition of marketing rights to OncoScint CR/OV
from Knoll and Chiron, respectively, and $1.4 million of legal and investment
banking fees related to the CytoRad merger.
General and administrative expenses were $4.8 million in 1995, $4.0 million
in 1994 and $7.0 million in 1993. The decrease in 1995 and 1994 from 1993 is
largely due to a reserve established in 1993 for the settlement of a class
action securities lawsuit (see Note 19 to the Consolidated Financial
Statements) and to reduced spending for general legal and corporate
communication.
Other Income/Expense. Net gain on investments for 1995 was $857,000 compared
to a net loss of $470,000 in 1994 and a net gain of $1.7 million in 1993. The
net loss in 1994 is attributable primarily to a
23
<PAGE>
$1.5 million loss recorded in 1994 as a result of the sale of government
securities due to the rise in interest rates. This loss was partially offset
by interest income of approximately $1.0 million in 1994. The lower net gain
on investments in 1995 when compared to 1993 is due primarily to lower average
cash and short term investment balances for the period. Imputed interest
expense on liabilities associated with CYTOGEN's termination agreements with
Knoll and Chiron was $593,000 in 1995 compared to $328,000 in 1994.
Net Loss. Net losses were $72.5 million, $32.8 million and $29.2 million in
1995, 1994 and 1993, respectively. Losses per share were $2.11, $1.38 and
$1.38 in 1995, 1994 and 1993, respectively, on 34.3 million, 23.8 million and
21.1 million average shares outstanding in each year, respectively. As
discussed above, the increase in 1995 from 1994 and 1993 in the net loss and
net loss per common share is primarily attributable to the charges to the
statement of operations for the acquisition of technology and marketing
rights. At December 31, 1995, the Company had outstanding (i) options to
purchase up to 3.0 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; (iii) contingent
value rights ("CVRs") to receive, under certain circumstances, up to 2.0
million shares of CYTOGEN common stock (which CVRs terminated in February
1996); (iv) the put right to issue and sell to a private institutional
investor that number of shares of common stock equal to $5.0 million divided
by a formula purchase price per share; and (v) the put right to issue and sell
to Fletcher Fund (defined below) up to 675,000 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, CVRs and put rights as their effect is antidilutive.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short term investments were $28.8 million as of
December 31, 1995, compared to $7.7 million as of December 31, 1994. The cash
used for operating activities was $25.7 million in 1995 compared to $27.7
million in 1994, reflecting a continued commitment by the Company to control
spending. Cash used for purchases of property and equipment was $600,000 in
1995 compared to $2.8 million in 1994 reflecting the 1994 capital expenditures
associated with the project to create additional manufacturing capacity to
produce the antibodies used with ProstaScint.
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 1995, the Company received from DuPont
Merck $4.0 million from the sale of 908,265 shares of CYTOGEN common stock.
In September 1995, CYTOGEN and Fletcher Fund L.P. ("Fletcher Fund") entered
into an investment agreement (the "Investment Agreement") pursuant to which
CYTOGEN (i) sold to Fletcher Fund 665,352 shares of CYTOGEN common stock in
September 1995 for an aggregate purchase price of $2.7 million, and (ii) will
have the right, during the period beginning October 13, 1995 and ending March
29, 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
designated twenty-one business day period. 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 CYTOGEN, but in no event shall the total number of shares sold by
CYTOGEN 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 in April 1994.
24
<PAGE>
In October 1995, CYTOGEN acquired Cellcor by merging Cellcor with and into a
wholly-owned subsidiary of CYTOGEN. In connection with a subscription offering
to Cellcor common stockholders, the Company raised an aggregate of $20.0
million, before certain transaction costs. See Note 2 to the Consolidated
Financial Statements.
In November 1995, the Company 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 of 1933, as amended, for an aggregate price
of $5.0 million and, in connection therewith, the Company was granted the
right to put to that private institutional investor, until March 31, 1996,
that number of shares equal to $5.0 million divided by a formula purchase
price (the "Put Purchase Price"). The Put Purchase Price is equal to 0.925
multiplied by a fraction, the numerator of which is the sum of the closing
prices reported on the Nasdaq National Market ("NASDAQ") for the CYTOGEN
common stock for each trading day during a twenty-one day pricing period, and
the denominator of which is the number of trading days in the pricing period.
In 1995 and the first quarter of 1996, Fletcher Capital Markets, Inc.
("Fletcher") purchased an aggregate of 3.3 million shares of CYTOGEN common
stock at an aggregate price of approximately $14.3 million, at prices ranging
from $4.058 to $4.70 per share, under an option agreement (the "Option")
granted to Fletcher in May 1994, as amended. See Note 13 to the Consolidated
Financial Statements.
CYTOGEN entered into a research and option agreement (the "Bracco
Agreement") with Bracco Industria Chimica S.p.A ("Bracco") in September 1989,
pursuant to which Bracco purchased 250,000 shares of CYTOGEN common stock (the
"Bracco Shares") at $8.00 per share. The Bracco Agreement provided that
CYTOGEN would be obligated to repurchase the Bracco Shares from Bracco under
certain circumstances for an aggregate purchase price of $2.0 million (the
"Purchase Price"). In August 1995, CYTOGEN and Bracco agreed that Bracco would
sell the Bracco Shares on NASDAQ and Bracco sold the Bracco Shares for an
aggregate share sales price ("Share Sales Price") of $1,375,000, or $5.50 per
share. At that date, Bracco had an outstanding payable due and owing to
CYTOGEN in an amount equal to $293,408 (the "Payable"). CYTOGEN also agreed to
pay to Bracco the amount equal to the difference between (i) the Purchase
Price and (ii) the sum of the Share Sales Price plus the Payable (or
$331,592), in full settlement of the issue, which amount has been paid.
The Company 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. Under that
agreement, CYTOGEN could have sold shares of its common stock to Nomura for
distribution in the public markets. CYTOGEN had filed a Registration Statement
on Form S-3 with the Securities Exchange Commission 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.
Product Related Revenues. CYTOGEN 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 U.S. since January 1993. To date, sales have
not been significant and are not expected to become a significant source of
cash flow in 1996. In anticipation of the execution of the Termination
Agreement (defined below), as of May 20, 1994, Knoll ceased its selling
efforts and since that date, CYTOGEN's direct sales force has been the sole
marketer in the U.S. of OncoScint CR/OV. Beginning in July 1994, product
related revenues have included direct product sales by CYTOGEN to its U.S.
customers. Since that date, CYTOGEN has not recorded any product sales to
Knoll or any co-promotion revenues. 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 this marketing strategy will be successful.
25
<PAGE>
In November 1994, the Company executed a termination agreement with Knoll
(the "Termination Agreement"). 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 $5.0 million of liabilities previously incurred
under the terms of a license, supply and marketing agreement executed in
December 1991 (the "Knoll Agreement"). The 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. See Note 6 to
the Consolidated Financial Statements.
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,
which consisted of the reacquisition price of $1.0 million, was partially
offset by a $127,000 receivable from Chiron, and 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.
See Note 11 to the Consolidated Financial Statements.
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 is approved for marketing.
In addition to one-time cash payments made upon execution of the agreements,
each of Faulding and CISbio will be required to make a payment upon the
achievement of a milestone, payments for the purchase of products and
royalties on net sales, if any.
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 will include the
cost recovery associated with the Treatment IND.
Research Services and Licenses. 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 $1.0
million in December 1994 and $1.3 million in January 1995 to fund additional
clinical programs to expand the use and marketing of Quadramet. The DP/Merck
Agreement further provides for future payments of up to $2.9 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.
In February 1995, CYTOGEN acquired CytoRad by merging CytoRad with and into
a wholly-owned subsidiary of CYTOGEN. As a result of the merger, the Company
will not recognize any further research contract revenues from CytoRad and
$11.7 million of CytoRad's cash and securities, before payment of certain
transaction costs, were acquired by the Company. See Note 5 to the
Consolidated Financial Statements.
CYTOGEN acquired an exclusive license in the U.S. from Dow for Quadramet in
1993. See Note 7 to the Consolidated Financial Statements. In the third
quarter of 1995, upon the filing of the NDA for Quadramet with FDA, CYTOGEN
recorded a one-time licensing fee of $2.0 million from Dow for its use of the
Quadramet NDA filing package. At the same time, CYTOGEN was required to pay to
Dow $1.0 million, which amount was offset against the $2.0 million payment
from Dow. In addition, 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
26
<PAGE>
payments for work performed by CYTOGEN not to exceed $1.5 million during the
first sixteen months of the research program.
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 $28.8 million at December 31, 1995, together with
other financing and acquisition opportunities which may become available
(including 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. This strategy may increase short
term expenses and, if successful, increase long term revenues. In addition,
certain of these transactions are 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. 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 ability of the Company to maintain any development schedules; (ii) the
results of clinical studies; (iii) 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; (iv) the profitability of its
products; (v) the ability to attract, and the ultimate success of strategic
partnering arrangements, collaborations, and acquisition candidates; (vi) 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; (vii) 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 (viii) 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.
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 ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
27
<PAGE>
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
"Security Ownership of Management and Principal Stockholders" in the Company's
Proxy Statement. One of the Company's Directors, Bruce R. Ross, 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 1996 Annual Meeting of
Stockholders. Information concerning Mr. Ross 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 "Security Ownership of Management and Principal Stockholders" in the
Company's Proxy Statement.
Bruce R. Ross, 55, has served as a director of the Company since April 1994.
Mr. Ross was a Senior Vice President of Bristol-Myers Squibb Company's
Pharmaceutical Group until his retirement on March 31, 1994. He joined
Bristol-Myers in 1967 and progressed through a variety of staff and line
management positions in Syracuse, New York; Evansville, Indiana; New York, New
York; and most recently, Princeton, New Jersey. He had responsibility for
Bristol-Myers Squibb's domestic pharmaceutical operations and the development
of its oncology business. Prior to joining Bristol-Myers Squibb, he worked as
a researcher in the field of cancer at Upstate Medical Center in Syracuse, New
York. Mr. Ross is a member of the Board of Directors of Sugen, Inc. and of the
Fox Chase Cancer Center in Philadelphia, is actively involved with the
American Cancer Society, and is the Chief Executive Officer of the National
Comprehensive Cancer Network. He holds a B.S. degree in Microbiology from
Syracuse University.
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
"Security Ownership of Management and 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.
28
<PAGE>
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. 10.8.1, 10.8.2, 10.8.3,
10.9.1, 10.9.2, 10.9.3, 10.23, 10.26, 10.34 and 10.35 below.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
2.1 --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.(17)
2.2.1 --Agreement and Plan of Merger, dated June 15, 1995 among the
registrant, Cellcor Acquisition Corp. (formerly known as Small-C
Acquisition Corp.), a wholly-owned subsidiary of the registrant, and
Cellcor, Inc.(20)
2.2.2 --First Amendment to Agreement and Plan of Merger, dated September 7,
1995 by and among the registrant, Cellcor Acquisition Corp. and
Cellcor, Inc.(23)
3.1 --Restated Certificate of Incorporation, as amended.(14)
3.2 --By-Laws of CYTOGEN Corporation, as amended.(14)
4.1 --Specimen of Common Stock Certificate.(5)
4.2 --Specimen of Warrant Certificate to purchase CYTOGEN Corporation
Common Stock, issued to stockholders of CytoRad Incorporated.(11)
4.3 --Specimen of Unit Certificate.(11)
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.(14)
10.1 --Voting and Subscription Agreement, dated June 15, 1995 among the
registrant, Cellcor Acquisition Corp. and the entities listed on
Schedule I thereto.(21)
10.2 --Form of Registration Rights Agreement for Common Stock between
CYTOGEN Corporation and certain persons listed on Schedule A
thereto.(22)
10.3.1 --Agreement effective as of June 2, 1983 between American Cyanamid
Company and CYTOGEN Corporation.(1)
10.3.2 --First Amendment dated January 29, 1985 to License Agreement between
American Cyanamid Company and CYTOGEN Corporation.(1)
10.4.1 --Non-Exclusive License Agreement dated April 24, 1989 between Eli
Lilly and Company and CYTOGEN Corporation.(7)
10.4.2 --Non-Exclusive License Agreement dated April 24, 1989 between Eli
Lilly and Company S.A. and CYTOGEN Corporation.(7)
10.4.3 --Stock Purchase Agreement, dated as of August 22, 1989, between Eli
Lilly and Company and CYTOGEN Corporation.(6)
10.5.1 --Production and Supply Agreement, dated September 29, 1989, between
CYTOGEN Corporation and Celltech Limited.(10)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.5.2 --Amendment No. 1 to the Production and Supply Agreement, dated
September 15, 1991, between CYTOGEN Corporation and Celltech
Limited.(11)*
10.5.3 --Agreement, dated November 7, 1991, between CYTOGEN Corporation and
Celltech Limited (the "Celltech Agreement").(11)*
10.5.4 --Amendment No. 3 to the Production and Supply Agreement, dated
January 9, 1992, between CYTOGEN Corporation and Celltech
Limited.(13)*
10.5.5 --Amendment No. 4 to the Production and Supply Agreement, dated
January 9, 1992, between CYTOGEN Corporation and Celltech
Limited.(13)*
10.5.6 --Amendment No. 5 to the Production and Supply Agreement, dated March
10, 1992, between CYTOGEN Corporation and Celltech Limited.(13)*
10.5.7 --Amendment No. 1 to the Celltech Agreement, dated March 9, 1992,
between CYTOGEN Corporation and Celltech Limited.(13)*
10.6.1 --Equipment Lease Agreement dated as of June 28, 1988, between MNC
Leasing Corporation and CYTOGEN Corporation.(3)
10.6.2 --Equipment Lease Agreement Assignment to General Electric Capital
Corporation, dated December 20, 1990, from MNC Leasing
Corporation.(9)
10.7.1 --Lease Agreement, dated as of March 16, 1987, by and between
Peregrine Investment Partners I, as lessor, and CYTOGEN Corporation,
as lessee.(2)
10.7.2 --Amendment, dated as of October 16, 1987, to Lease Agreement between
Peregrine Investment Partners I and CYTOGEN Corporation.(4)
10.7.3 --Lease Agreement, dated November 14, 1989 between College Road
Associates, Limited Partnership and CYTOGEN Corporation.(10)
10.7.4 --Lease Agreement, dated as of February 20, 1986, between College Road
Associates and CYTOGEN Corporation, as amended on June 27, 1986.(8)
10.7.5 --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.(8)
10.7.6 --Lease Agreement, dated as of November 26, 1991, between College Road
Associates, Limited Partnership and CYTOGEN Corporation.(11)
10.8.1 --1989 Employee Stock Option Plan.(4)
10.8.2 --CYTOGEN Corporation Standard Form Employee Executive Officer
Incentive Stock Option Agreement.(9)
10.8.3 --CYTOGEN Corporation Standard Form Employee Executive Officer Non-
Qualified Stock Option Agreement.(9)
10.9.1 --1988 Stock Option Plan for Non-Employee Directors.(4)
10.9.2 --CYTOGEN Corporation Standard Form Non-Employee Director Non-
Qualified Stock Option Agreement.(9)
10.9.3 --CYTOGEN Corporation Standard Form 1992 Employee Non-Qualified Stock
Option Agreement.(13)
10.10 --Standard Form of Indemnification Agreement entered into between
CYTOGEN Corporation and its officers, directors, and consultants.(6)
10.11 --1989 Stock Option Policy for Outside Consultants.(6)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.12 --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.(11)
10.13 --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.(13)*
10.14 --License Agreement dated as of March 31, 1993 between CYTOGEN
Corporation and The Dow Chemical Company.(12)*
10.15 --Investment Agreement dated as of February 24, 1994 between CYTOGEN
Corporation and Fletcher Capital Markets, Inc.(18)
10.16.1 --Amended and Restated Investment Agreement, dated as of May 6, 1994,
between CYTOGEN Corporation and Fletcher Capital Markets, Inc.(15)
10.16.2 --Amendment to the Option Agreement between CYTOGEN Corporation and
Fletcher Capital Markets, Inc. dated August 10, 1995.(22)
10.16.3 --Second Amendment to the Option Agreement between CYTOGEN Corporation
and Fletcher Capital Markets, Inc. dated November 15, 1995.
10.17 --License Agreement by and between CYTOGEN Corporation and The DuPont
Merck Pharmaceutical Company.(14)*
10.18 --Agreement to Terminate License, Supply and Marketing Agreement,
dated as of November 1, 1994, between CYTOGEN Corporation and Knoll
Pharmaceutical Company.(14)
10.19 --Order Fulfillment Agreement, dated as of November 1, 1994, between
CYTOGEN Corporation and Knoll Pharmaceutical Company.(14)
10.20 --Letter Agreement, dated November 1, 1994, between CYTOGEN
Corporation and Knoll Pharmaceutical Company.(14)
10.21 --Disengagement Agreement, dated December 30, 1994, between CYTOGEN
Corporation and Chiron B.V.(14)*
10.22 --1992 CYTOGEN Corporation Employee Stock Option Plan II, as
amended.(14)
10.23 --Stock Compensation and Performance Option Agreement, dated December
8, 1994, between CYTOGEN Corporation and Dr. Thomas J. McKearn.(14)
10.24 --License Agreement, dated March 10, 1993, between CYTOGEN Corporation
and The University of North Carolina at Chapel Hill, as amended.(19)*
10.25 --Option and License Agreement, dated July 1, 1993, between CYTOGEN
Corporation and Sloan-Kettering Institute for Cancer Research.(19)*
10.26 --Description of Arrangement with Somerset Central Corporation.
10.27 --Investment Agreement between CYTOGEN Corporation and Fletcher Fund
L.P. dated September 8, 1995.(22)
10.28 --Technology Licensing and Service Agreement, dated March 14, 1994,
between Cellcor, Inc. and SRL, Inc.(16)
10.29 --Lease Agreement between Cellcor, Inc. and Leon H. Cohen, Trustee of
200 Wells Avenue Realty Trust, dated January 31, 1990, as
amended.(24)
10.30 --CYTOGEN Corporation 1995 Stock Option Plan.
10.31 --Research and Development and Option Agreement, dated December 14,
1995, between CYTOGEN Corporation and Elan Corporation, plc.**
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.32 --Distribution Agreement, dated December 22, 1995, between CYTOGEN
Corporation and Faulding (Canada) Inc.**
10.33 --Distribution Agreement, dated January 16, 1996, between CYTOGEN
Corporation and CIS biointernational.**
10.34 --Severance Agreement effective as of January 1, 1994 between CYTOGEN
Corporation and Thomas J. McKearn, M.D., Ph.D.
10.35 --Description of Severance Agreement with Richard J. Walsh.
10.36 --Horosziewicz-CYTOGEN Agreement, dated April 20, 1989, between
CYTOGEN Corporation and Julius S. Horosziewicz, M.D., DMSe.**
21 --Subsidiaries of CYTOGEN Corporation.
23 --Consent of Arthur Andersen LLP.
27 --Financial Data Schedule (submitted to SEC only in electronic
format).
99 --Standard Form of Confidentiality Agreement (as executed by all
officers and employees).(2)
</TABLE>
- --------
(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 (Commission File No. 0-14879) and incorporated herein by reference.
(3) Filed as an exhibit to Form 10-K Annual Report for Year Ended December
31, 1988 (Commission File No. 0-14879) and incorporated herein by
reference.
(4) Filed as an exhibit to Form S-8 Registration Statement (No. 33-30595) and
incorporated herein by reference.
(5) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration Statement
(No. 33-5533) and incorporated herein by reference.
(6) Filed as an exhibit to Amendment No. 1 to Form S-1 Registration Statement
(No. 33-31280) and incorporated herein by reference.
(7) Filed as an exhibit to Pre-Effective Amendment No. 2 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. 33-35430) and incorporated herein by
reference.
(9) Filed as an exhibit to Form 10-K Annual Report for the Year Ended
December 29, 1990 (Commission File No. 0-14879) and incorporated herein
by reference.
(10) Filed as an exhibit to Amendment No. 1 to Form 10-K Annual Report for the
Year Ended December 29, 1990 (Commission File No. 0-14879) and
incorporated herein by reference.
(11) Filed as an exhibit to Form 10-K Annual Report for the Year Ended
December 28, 1991 (Commission File No. 0-14879) and incorporated herein
by reference.
(12) Filed as an exhibit to Form 10-Q/A-1 Amendment to Quarterly Report for
the quarter ended July 3, 1993 (Commission File No. 0-14879) and
incorporated herein by reference.
(13) Filed as an exhibit to Form 10-K Annual Report for the Year Ended January
2, 1993 (Commission File No. 0-14879) and incorporated herein by
reference.
(14) Filed as an exhibit to Form S-4 Registration Statement (No. 33-88612) and
incorporated herein by reference.
(15) Filed as an exhibit to Form 10-Q Quarterly Report for the quarter ended
March 31, 1994 (Commission File No. 0-14879), as amended, and
incorporated herein by reference.
(16) Filed as Exhibit 10.1 to Cellcor, Inc.'s Form 10-Q Quarterly Report for
the quarter ended March 31, 1994 (Commission File No. 0-19823) and
incorporated herein by reference.
(17) Filed as an exhibit to Form 8-K dated November 15, 1994 (Commission File
No. 0-14879) and incorporated herein by reference.
(18) Filed as an exhibit to Form 10-K Annual Report for the Year Ended January
1, 1994 (Commission File No. 0-14879) and incorporated herein by
reference.
32
<PAGE>
(19) Filed as an exhibit to Form 10-K Annual Report for the Year Ended
December 31, 1994 (Commission File No. 0-14879) and incorporated herein
by reference.
(20) Filed as an exhibit to Form 8-K dated June 15, 1995 (Commission File No.
0-14879) and incorporated herein by reference.
(21) Filed as Annex B to the Joint Proxy Statement/Prospectus dated July 17,
1995 and incorporated herein by reference.
(22) Filed as an exhibit to Form S-4 Registration Statement (No. 33-62617) and
incorporated herein by reference.
(23) Filed as Annex A to the Joint Proxy Statement/Prospectus constituting
part of the Registration Statement on Form S-4 (No. 33-62617) and
incorporated herein by reference.
(24) Filed as Exhibit 10.09 to Cellcor, Inc.'s Form S-1 Registration Statement
(No. 33-45448) 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 two Reports on Form 8-K during the fourth quarter of
1995 and the dates of such reports were October 16, 1995 and October 20,
1995. The Form 8-K dated October 16, 1995 reported on "Item 5. Other
Events" with respect to a press release announcing the results of the
special stockholders' meeting. The Form 8-K dated October 20, 1995 reported
on "Item 2. Acquisition or Disposition of Assets" regarding the completion
of the acquisition of Cellcor pursuant to the Agreement and Plan of Merger
and filed therein were the following financial statements: (a) Cellcor
Audited Balance Sheets as of December 31, 1994 and 1993, Statements of
Operations for the three years ended December 31, 1994, Statements of Cash
Flows for the three years ended December 31, 1994, Statements of
Stockholders' Equity for the three years ended December 31, 1994 and
related Notes to Financial Statements; (b) Cellcor Unaudited Balance Sheet
as of June 30, 1995, Statements of Operations for six months ended June 30,
1995 and 1994, Statements of Cash Flows for six months ended June 30, 1995
and 1994 and related Notes to Financial Statements; and (c) CYTOGEN and
Subsidiaries Unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 1995, Statements of Operation for the year ended December 31, 1995
and for the six months ended June 30, 1995 and related Notes to Financial
Statements.
(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.
33
<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 26TH DAY OF
MARCH, 1996.
CYTOGEN CORPORATION
/s/ Thomas J. McKearn
By __________________________________
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 March 26, 1996
- ------------------------------------- Board of Directors
WILLIAM C. MILLS III
/s/ Thomas J. McKearn President, Chief March 26, 1996
- ------------------------------------- Executive Officer
THOMAS J. MCKEARN and Director
(Principal
Executive Officer)
/s/ T. Jerome Madison Vice President, March 26, 1996
- ------------------------------------- Chief Financial
T. JEROME MADISON Officer, Secretary
and Director
(Principal
Financial and
Accounting Officer)
/s/ Charles E. Austin Director March 26, 1996
- -------------------------------------
CHARLES E. AUSTIN
34
<PAGE>
SIGNATURE TITLE DATE
/s/ John E. Bagalay, Jr. Director March 26, 1996
- -------------------------------------
JOHN E. BAGALAY, JR.
/s/ Ronald J. Brenner Director March 26, 1996
- -------------------------------------
RONALD J. BRENNER
/s/ Robert F. Hendrickson Director March 26, 1996
- -------------------------------------
ROBERT F. HENDRICKSON
/s/ Donald E. O'Neill Director March 26, 1996
- -------------------------------------
DONALD E. O'NEILL
/s/ Bruce R. Ross Director March 26, 1996
- -------------------------------------
BRUCE R. ROSS
35
<PAGE>
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1995
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 SUBSIDIARIES
LIST OF CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT
SCHEDULES
(1) Consolidated Financial Statements
The following consolidated financial statements of CYTOGEN Corporation and
Subsidiaries together with the related notes and report of Arthur Andersen LLP,
independent public accountants, are included in Item 8:
<TABLE>
<CAPTION>
PAGE IN
FORM 10-K
---------
<S> <C>
Report of Independent Public Accountants............................. 38
Consolidated Balance Sheets as of December 31, 1995 and 1994......... 39
Consolidated Statements of Operations--Years Ended December 31, 1995,
December 31, 1994 and January 1, 1994............................... 40
Consolidated Statements of Stockholders' Equity--Years Ended December
31, 1995 and December 31, 1994 and January 1, 1994.................. 41
Consolidated Statements of Cash Flows--Years Ended December 31, 1995,
December 31, 1994 and January 1, 1994............................... 42
Notes to Consolidated Financial Statements........................... 43
(2) Consolidated Financial Statement Schedules
The following consolidated financial statement schedule of CYTOGEN
Corporation and Subsidiaries is included in Item 14(d):
Schedule II--Valuation and Qualifying Accounts....................... 54
</TABLE>
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 Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. 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
Subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995 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 schedule 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. This schedule has 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 2, 1996 (except
with respect to the matter
discussed in Note 5 as to
which the date is February
29, 1996)
38
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents.............................. $ 27,551 $ 7,700
Short term investments................................. 1,201 -
Restricted Cash........................................ 383 -
Accounts receivable, net of allowance for doubtful
accounts of $536 and $526 in 1995 and 1994,
respectively.......................................... 284 294
Receivable from CytoRad Incorporated................... - 810
Inventories............................................ 356 3,159
Other current assets................................... 360 437
--------- ---------
Total current assets................................. 30,135 12,400
--------- ---------
Property and Equipment:
Leasehold improvements................................. 9,850 9,005
Equipment and furniture................................ 6,535 5,923
--------- ---------
16,385 14,928
Less--Accumulated depreciation and amortization........ (10,923) (9,377)
--------- ---------
Net property and equipment........................... 5,462 5,551
--------- ---------
Other Assets............................................. 1,552 1,739
--------- ---------
$ 37,149 $ 19,690
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued liabilities............... $ 6,385 $ 6,371
Current portion of long term liabilities............... 2,213 2,641
--------- ---------
Total current liabilities............................ 8,598 9,012
--------- ---------
Long Term Liabilities.................................... 3,275 4,310
--------- ---------
Commitments and Contingencies (Note 18)
Redeemable Common Stock, 250,000 shares issued and
outstanding in 1994, at redemption value................ - 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, 46,040,000 and 24,658,000 shares issued
and outstanding in 1995 and 1994, respectively........ 460 247
Additional paid-in capital............................. 253,122 159,941
Unrealized gains on short term investments............. 34 -
Accumulated deficit.................................... (228,340) (155,820)
--------- ---------
Total stockholders' equity........................... 25,276 4,368
--------- ---------
$ 37,149 $ 19,690
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
39
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Product related................................ $ 1,377 $ 1,411 $ 1,591
License and contract........................... 3,608 1,047 8,763
-------- -------- --------
Total Revenues............................... 4,985 2,458 10,354
-------- -------- --------
Operating Expenses:
Research and development....................... 22,594 20,321 24,844
Selling and marketing.......................... 4,493 5,536 9,399
Acquisition of technology and marketing rights. 45,878 4,647 -
General and administrative..................... 4,804 3,962 7,016
-------- -------- --------
Total Operating Expenses..................... 77,769 34,466 41,259
-------- -------- --------
Loss from Operations............................. $(72,784) $(32,008) $(30,905)
-------- -------- --------
Gain (loss) on investments, net.................. 857 (470) 1,676
Interest expense................................. (593) (328) -
-------- -------- --------
Net Loss......................................... $(72,520) $(32,806) $(29,229)
======== ======== ========
Net Loss per Common Share........................ $ (2.11) $ (1.38) $ (1.38)
======== ======== ========
Weighted Average Common Shares Outstanding....... 34,333 23,822 21,121
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
40
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(ALL AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAINS ON
COMMON PAID-IN SHORT-TERM ACCUMULATED
STOCK CAPITAL INVESTMENTS DEFICIT
------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 2, 1993............. $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............. 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........... 247 159,941 - (155,820)
Issued 2,830,182 shares of common
stock............................... 28 11,520 - -
Redemption of common stock........... 3 1,372 - -
Issued 6,035,235 shares of common
stock in connection with the
acquisition of CytoRad Inc.......... 60 29,638 - -
Issued 4,713,565 shares of common
stock in connection with the
acquisition of Cellcor Inc. (see
Note 1)............................. 47 21,164 - -
Issued 5,144,388 shares of common
stock in connection with a
subscription offering............... 51 19,480 - -
Granted 15,000 shares of common
stock............................... - 50 - -
Issued 2,393,000 shares of common
stock upon exercise of stock
options............................. 24 9,957 - -
Unrealized gains on investments...... - - 34 -
Net loss............................. - - - (72,520)
---- -------- ---- ---------
Balance, December 31, 1995........... $460 $253,122 $ 34 $(228,340)
==== ======== ==== =========
</TABLE>
The accompanying notes are an integral part of these statements.
41
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss........................................ $(72,520) $(32,806) $(29,229)
Adjustments to Reconcile Net Loss to Cash Used
for Operating Activities:
Acquisition of Marketing and Technology
Rights....................................... 45,878 3,220 -
Depreciation and Amortization................. 1,546 1,009 1,297
Imputed Interest.............................. 593 328 -
Idle Equipment................................ - - 215
Inventory Writedown........................... 2,926 1,074 2,346
Writedown of Land............................. - - 600
Warrants Issued to Acquire Technology......... - - 507
Stock Grants.................................. 78 62 7
Amortization of Deferred Charges.............. (17) (110) (84)
Changes in Assets and Liabilities, Net of
Effect from Acqusitions:
Accounts receivable, net.................... (255) (71) 2,531
Receivable from CytoRad Incorporated........ - (62) 480
Inventories................................. (82) (145) (998)
Other current assets........................ 469 238 1,328
Other assets................................ 291 (327) 1
Accounts payable and accrued liabilities.... (2,170) 667 5,620
Other liabilities........................... (2,461) (722) -
-------- -------- --------
Total adjustments......................... 46,796 5,161 13,850
-------- -------- --------
Net cash used for operating activities........ (25,724) (27,645) (15,379)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Cash Acquired in CytoRad Acquisition (See
Note 5)........................................ 10,455 - -
Net Cash Used to Acquire Cellcor Inc. (See Note
2)............................................. (3,463) - -
(Increase) Decrease in Short Term Investments... (1,167) 19,690 13,171
Increase in Restricted Cash..................... (383) - -
Purchases of Property and Equipment............. (595) (2,835) (1,555)
-------- -------- --------
Net cash provided by investing activities..... 4,847 16,855 11,616
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Common Stock.......... 41,060 14,416 1,403
Redemption of Common Stock...................... (332) - -
Proceeds from Warrants Issued in Connection with
CytoRad Incorporated........................... - - 3,557
-------- -------- --------
Net cash provided by financing activities..... 40,728 14,416 4,960
-------- -------- --------
Net Increase in Cash and Cash Equivalents....... 19,851 3,626 1,197
Cash and Cash Equivalents, Beginning of Year.... 7,700 4,074 2,877
-------- -------- --------
Cash and Cash Equivalents, End of Year.......... $ 27,551 $ 7,700 $ 4,074
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
42
<PAGE>
CYTOGEN CORPORATION AND SUDSIDIARIES
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, manufacture and marketing of
products to better diagnose and treat cancer and other related immunologic
diseases. In November 1995, FDA approved the PLA supplement for OncoScint
CR/OV, expanding the approved indication to include repeat administration of
the product. OncoScint CR/OV was initially approved by FDA in December 1992
but restricted to a single administration per patient. In August 1995, the NDA
for Quadramet (or Samarium 153 EDTMP), CYTOGEN's treatment for the severe pain
associated with cancer that spreads to the bone, was officially filed by FDA.
In March 1995, the PLA for ProstaScint, CYTOGEN's prostate cancer diagnostic
imaging product, was officially filed by FDA. In 1991, CYTOGEN received
approval for the sale of its OncoScint colorectal cancer imaging product in
Europe. In October 1995, CYTOGEN acquired Cellcor. Cellcor, a wholly-owned
subsidiary of CYTOGEN, is a biotechnology company engaged in the development
and commercialization of cellular therapies. References herein to the
"Company" may mean CYTOGEN and Cellcor on a consolidated basis taken as a
whole, where appropriate. In order to develop, manufacture and commercialize
its products effectively, the Company will require additional financing.
Operations of the Company are subject to certain risks and uncertainties
including, but not limited to uncertainties related to product market
acceptance and clinical trials, technological uncertainty, uncertainties of
future profitability, access to capital, dependence on collaborative
relationships and key personnel.
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.
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 relate to the
fiscal year ended January 1, 1994.
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 reevaluates such designation as of each
balance sheet date. At December 31, 1995, 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 $34,000 has been recorded
as a separate component of stockholders' equity at December 31, 1995.
43
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
Inventory
The Company's inventory is primarily related to OncoScint CR/OV, its FDA-
approved 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>
1995 1994
-------- ----------
<S> <C> <C>
Raw Materials............................................ $ 46,000 $2,771,000
Work in Process.......................................... - 49,000
Finished Goods........................................... 310,000 339,000
-------- ----------
$356,000 $3,159,000
======== ==========
</TABLE>
At December 31, 1995 and 1994, inventory is net of reserves of $3.8 million
and 1.5 million, respectively.
Property and Depreciation
Equipment and furniture 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 1995, 1994 and 1993, repairs and maintenance
expenses were $274,000, $382,000 and $310,000, respectively.
Other Assets
Other assets consist primarily 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
11).
Revenue Recognition
Product related revenues include (i) product sales by CYTOGEN to its
customers and its former U.S. and European distributors, Knoll and 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. See Notes 6 and 11
for discussion of the changes in CYTOGEN's relationships with Knoll and
Chiron, respectively. Beginning on October 20, 1995, as a result of CYTOGEN's
acquisition of Cellcor (see Note 2), product related revenues also include the
recovery of costs associated with the treatment of patients who have received
ALT for metastatic renal cell carcinoma under a compassionate protocol, based
on the expected payments from third party payors and patients.
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.
44
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 $200,000,
$29,000 and $9,112,000 in 1995, 1994 and 1993, respectively.
Patent Costs
Patent costs are expensed as 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 December 31,
1995, 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 2.
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.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt
this standard for the year ending December 31, 1996. The Company has elected
to adopt the disclosure requirement of this pronouncement. The adoption of
this pronouncement will have no impact on the Company's statement of
operations.
Reclassification
Certain reclassifications have been reflected in the 1993 and 1994 financial
statements to conform with the 1995 presentation.
Supplemental Schedule of Noncash Financing Activity
In 1994, CYTOGEN issued 197,942 shares of common stock in settlement of a
lawsuit (see Note 19).
2. CELLCOR, INC.:
CYTOGEN entered into an Agreement and Plan of Merger dated June 15, 1995, as
amended (the "Merger Agreement"), with Cellcor. At the effective time of the
Cellcor merger, each outstanding share of Cellcor common stock was converted
into the right to receive 0.60 shares of CYTOGEN common stock and each
outstanding share of Cellcor Convertible Preferred Stock was converted into
the right to receive 218.94 shares of CYTOGEN common stock. In addition,
holders of record of Cellcor common stock were granted the non-transferable
right to purchase for cash up to an aggregate of approximately $26 million of
CYTOGEN common stock (the "Subscription Offering"). Each holder of Cellcor
common stock was entitled to purchase 1.118 shares of CYTOGEN common stock for
each share of Cellcor common stock (rounded down to the nearest whole number)
held by such holder at the close of business on the Subscription Offering
record date, at a price of $3.89 per share of CYTOGEN common stock. Under the
terms of the Merger Agreement, CYTOGEN also assumed all then outstanding
options to purchase Cellcor common stock granted under Cellcor employee stock
option
45
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
plans ("Cellcor Stock Options") and all then outstanding warrants to purchase
Cellcor common stock, exercisable for the equivalent of CYTOGEN common stock
using the above described exchange ratio.
On October 20, 1995, CYTOGEN completed its acquisition of Cellcor. As a
result of the Cellcor merger, 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 Cellcor Stock Options. 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 in the fourth quarter of 1995, which charge represented the amount
by which the purchase price exceeded the fair value of net assets acquired
from Cellcor.
3. ELAN CORPORATION:
In December 1995, CYTOGEN and Elan entered into the Elan Agreement 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. 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.
4. DUPONT MERCK:
On December 20, 1994, CYTOGEN entered into the DP/Merck Agreement with
DuPont Merck. Under the terms of the DP/Merck Agreement, CYTOGEN has licensed
to DuPont Merck CYTOGEN's manufacturing and marketing rights to Quadramet in
the U.S., if and when approved for marketing by FDA. CYTOGEN has retained the
right to co-promote the product to nuclear medicine specialists. CYTOGEN
acquired the U.S. rights to Quadramet from 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 7). The NDA for
Quadramet was officially filed by FDA in August 1995.
Pursuant to the terms of the DP/Merck Agreement, CYTOGEN received from
DuPont Merck an up-front cash payment of $1.0 million in December 1994, $4.0
million in January 1995 for the sale of 908,265 shares of CYTOGEN's common
stock to DuPont Merck and $1.3 million in January 1995 to fund additional
clinical programs to expand the use and marketing of Quadramet. The DP/Merck
Agreement further provides for future payments of up to $2.9 million toward
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.
5. CYTORAD INCORPORATED:
On November 15, 1994, CYTOGEN entered into an Agreement and Plan of Merger
(the "CytoRad Merger Agreement") with CytoRad to purchase all of CytoRad's
outstanding units, each unit consisting of one share of the callable common
stock of CytoRad and one warrant to purchase one share of CYTOGEN common stock
at $24.15 per share. Pursuant to the CytoRad Merger Agreement, on January 20,
1995, CYTOGEN commenced an exchange offer to exchange for each 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 CVR
to receive, under certain circumstances and at no additional cost, up to one-
half share of CYTOGEN common stock. The CVRs were to be triggered in the event
that the aggregate trading price of 1.5 shares of CYTOGEN common
46
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
stock and the new warrant averaged less than $12.00 during the 45 consecutive
trading days ending January 31, 1997, but were to expire and have no value if
the aggregate trading price for such securities averaged $12.00 or more during
any 45 consecutive trading days prior to January 31, 1997. 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.
On February 27, 1995, CYTOGEN 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 CYTOGEN common stock and one CVR for each share of CytoRad
common stock owned thereby. As of December 31, 1995, CYTOGEN had issued
6,035,235 shares of common stock, 4,023,495 CVRs and 4,023,495 warrants
pursuant to the exchange offer. Although the 1,505 previously issued CYTOGEN
warrants forming a part of CytoRad units not tendered in the exchange offer
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
CytoRad Merger Agreement. As a result of the merger, the Company reacquired
all rights it had previously licensed to CytoRad. In addition, the Company
acquired $11.7 million of CytoRad's cash and securities, before payment of
certain transaction costs. In the first quarter of 1995, CYTOGEN recorded
approximately $19.7 million for acquisition of technology and marketing rights
as a charge to its statement of operations, representing the amount by which
the purchase price exceeded the fair value of net assets acquired from
CytoRad.
Prior to the merger, CYTOGEN did not recognize any contract revenues for
services performed on behalf of CytoRad in 1995 and 1994, due to the
uncertainty of the CytoRad business relationship. In 1993, CYTOGEN recorded
$5.9 million of contract revenues from CytoRad, net of amortization of
warrants issued.
6. KNOLL PHARMACEUTICAL COMPANY:
In December 1991, CYTOGEN and Knoll entered into the Knoll Agreement for the
co-promotion of OncoScint CR/OV in the U.S. The agreement provided for
revenues from product sales from the supply of commercial product by CYTOGEN
to Knoll, co-promotion revenues from the sale of commercial product by Knoll
to its customers, and reimbursement to CYTOGEN of certain product development
expenses. CYTOGEN also agreed to share with Knoll certain sales promotion
expenses which were to be paid by CYTOGEN from earned co-promotion revenues.
In 1994 and 1993, CYTOGEN incurred $412,000 and $5.1 million, respectively, in
co-promotion expenses and recognized $430,000 and $977,000, respectively, in
co-promotion revenues.
On November 1, 1994, CYTOGEN executed the Termination Agreement with Knoll.
Pursuant to the Termination Agreement, the Company has reacquired from Knoll
all U.S. marketing rights (the "U.S. Rights") to OncoScint CR/OV, which were
previously granted to Knoll pursuant to the Knoll Agreement. 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 $5.0 million
of liabilities previously incurred under the terms of the Knoll Agreement. The
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 November 1994, CYTOGEN recorded a non-recurring
charge of $2.4 million for the reacquisition of the U.S. Rights. Imputed
interest of $521,000 and $328,000 relating to the obligation, which was
discounted based upon a 10% interest rate, was recorded in 1995 and 1994,
respectively.
In anticipation of the execution of the Termination Agreement, as of May 20,
1994, Knoll ceased its selling efforts, and since that date, CYTOGEN's direct
sales force has been the sole marketer in the U.S. of OncoScint CR/OV.
Beginning on July 1, 1994, the Company has not recorded any product sales to
Knoll or any co-promotion revenues.
47
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. THE DOW CHEMICAL COMPANY:
In 1993, CYTOGEN acquired an exclusive license in the U.S. from Dow for
Quadramet. In connection with this acquisition, CYTOGEN issued to Dow warrants
to purchase 260,000 shares of CYTOGEN'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. In the third quarter of 1995, upon the
filing of the NDA for Quadramet with FDA, CYTOGEN recorded a one-time
licensing fee of $2.0 million from Dow for its use of the Quadramet NDA filing
package. At the same time, CYTOGEN was required to pay to Dow $1.0 millon. 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.
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>
CUSTOMER 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C>
Dow (Note 7).................................................. 39% - % - %
DuPont Merck (Note 4)......................................... 27 41 -
Medi-Physics, Inc............................................. 12 - -
Knoll (Note 6)................................................ - 16 14
CytoRad (Note 5).............................................. - - 76
</TABLE>
Medi-Physics, Inc. is a chain of radiopharmacies.
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Professional and legal................................ $1,487,000 $ 468,000
Accounts payable...................................... 1,307,000 1,572,000
Payroll............................................... 1,267,000 278,000
Research contracts and materials...................... 965,000 2,694,000
Other accruals........................................ 1,359,000 1,359,000
---------- ----------
$6,385,000 $6,371,000
========== ==========
</TABLE>
10. LINE-OF-CREDIT:
At December 31, 1995, the Company had an unused secured line-of-credit of
$3.0 million 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 and 1995.
48
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. LONG TERM LIABILITIES:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Due to Knoll, net of $722,000 receivable in 1994
(Note 6)............................................ $4,237,000 $6,157,000
Due to Chiron, net of $125,000 receivable in 1994.... 785,000 712,000
Capital lease obligations............................ 448,000 -
Deferred charges..................................... 18,000 82,000
---------- ----------
5,488,000 6,951,000
Less: Current portion................................ 2,213,000 2,641,000
---------- ----------
$3,275,000 $4,310,000
========== ==========
</TABLE>
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 and as amended on May 18, 1992, CYTOGEN had granted to Chiron the
European Rights, under which contract and product related revenues of $3,000,
$162,000 and $164,000 were recognized in 1995, 1994 and 1993, respectively.
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 12 countries in Europe. This reacquisition was consummated
on February 16, 1995. The resulting liability of CYTOGEN to Chiron, which
consisted of the reacquisition price of $1.0 million, was partially offset by
a then outstanding receivable of $127,000 from Chiron, and 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. As a result of the reacquisition of the European Rights, CYTOGEN
recorded a liability and non-recurring charge of $800,000 in the fourth
quarter of 1994. Imputed interest of $71,000 relating to the obligation, based
upon a 10% interest rate, was recorded in 1995. 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. (see Note 18).
The Company leases certain equipment under capital leases which will expire
on various dates through 2000. Property and equipment leased under non-
cancelable capital leases have a net book value of $462,000 at December 31,
1995. Payments to be made under capital lease obligations (including interest
of $84,000) are as follows: $139,000 in 1996, $133,000 in 1997, $126,000 in
1998, $119,000 in 1999 and $15,000 in 2000.
12. REDEEMABLE COMMON STOCK:
In September 1989, CYTOGEN entered into the Bracco Agreement, pursuant to
which Bracco purchased 250,000 shares of CYTOGEN common stock at $8.00 per
share. The Bracco Agreement provided that CYTOGEN would be obligated to
repurchase the Bracco Shares from Bracco under certain circumstances for an
aggregate purchase price of $2.0 million (the "Purchase Price"). In August
1995, CYTOGEN and Bracco agreed that Bracco would sell the Bracco Shares on
NASDAQ and Bracco sold the Bracco Shares for an aggregate purchase price of
$1,375,000 (the "Shares Sale Price"), or $5.50 per share. At that date, Bracco
had an outstanding account payable due and owing to CYTOGEN in an amount equal
to $293,408 (the "Payable"). CYTOGEN also agreed to pay to Bracco the amount
equal to the difference between (i) the Purchase Price and (ii) the sum of the
Shares Sales Price plus the Payable (or $331,592), in full settlement of the
issue, which amount has been paid.
Under the Bracco Agreement, contract revenues of $41,000 and $860,000 were
recognized in 1994 and 1993, respectively.
49
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMON STOCK:
In January 1994, CYTOGEN 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, CYTOGEN and Fletcher entered into a revised investment
agreement under which (i) Fletcher purchased 500,000 shares of CYTOGEN common
stock at a price of $3.50 per share totalling $1.7 million, (ii) assignees of
Fletcher purchased an additional 900,000 shares of CYTOGEN common stock in
August 1994 at $4.00 per share totalling $3.6 million, (iii) Fletcher
purchased 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, under the
Option, pursuant to which Fletcher could purchase up to 9.9% of CYTOGEN's
outstanding common stock (including shares previously purchased), (iv)
Fletcher purchased 500,000 shares of CYTOGEN common stock in November 1995, at
an aggregate price of $2.3 million, or $4.696 per share, pursuant to the
exercise of the Option, as amended in August 1995, and (v) Fletcher purchased
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 the
exercise of the Option, as amended in November 1995.
In September 1995, CYTOGEN and Fletcher Fund entered into the Investment
Agreement pursuant to which CYTOGEN (i) sold to Fletcher Fund 665,352 shares
of CYTOGEN common stock on September 11, 1995 for an aggregate purchase price
of $2.7 million, and (ii) will have the right, during the period beginning
October 13, 1995 and ending March 29, 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 (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 NASDAQ during a designated
twenty-one business day period. 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
CYTOGEN, but in no event shall the total number of shares sold by CYTOGEN 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 Commission in April 1994.
In November 1995, the Company 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 and,
in connection therewith, the Company was granted the right to put to that
investor, until March 31, 1996, that number of shares equal to $5 million
divided by a formula purchase price.
The Company and Nomura executed an agreement effective as of February 23,
1996 that terminated the Purchase Agreement between the Company and Nomura
dated March 28, 1995. No sales of stock occurred under the terms of the
agreement.
See Notes 2, 4, 5 and 19 for information related to the Company's issuance
of common stock in connection with the Cellcor merger, DP/Merck Agreement,
CytoRad merger and settlement of stockholders litigation, respectively. See
Note 12 for discussion of redeemable common stock.
50
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. 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, 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 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
Granted............................................. 1,425,607 2.69-5.47
Exercised........................................... (91,400) 1.00-3.88
Cancelled........................................... (509,290) 2.69-17.00
--------- -----------
Balance at December 31, 1995.......................... 2,952,857 $2.69-17.00
========= ===========
</TABLE>
At December 31, 1995, options to purchase 670,843 shares were exercisable
and 310,142 shares were available for issuance of additional options that may
be granted under the plans.
In connection with the Cellcor merger (see Note 2), CYTOGEN reserved for
issuance 606,952 shares of common stock that will become issuable upon the
exercise of the Cellcor Stock Options assumed by CYTOGEN under the terms of
the Merger Agreement. At December 31, 1995, 603,052 Cellcor Stock Options were
outstanding at exercise prices ranging from $0.50 to $8.75 and 301,889 Cellcor
Stock Options were exercisable.
In 1995, 1994 and 1993, respectively, 15,000, 10,000 and 500 shares of
common stock were granted to the officers of the Company and a member of
CYTOGEN'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.
15. RELATED PARTY TRANSACTIONS:
Consulting services are provided under an agreement with a company owned by
an officer of the Company, who is a member of the Board of Directors. In 1993,
one of CYTOGEN's former principal stockholders, who was a member of the Board
of Directors, also provided consulting services to CYTOGEN. The annual fees
under the agreements were $208,000, $180,000 and $61,900 in 1995, 1994 and
1993, respectively.
The seven members of CYTOGEN's Scientific Advisory Board were stockholders
and provided consulting services to CYTOGEN in 1993. Consulting fees,
including stock grants, paid to the five non-employee members totaled $47,000
in 1993.
51
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. PENSION PLANS:
CYTOGEN 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. CYTOGEN 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 $311,000, $256,000 and $335,000 for 1995, 1994 and 1993,
respectively.
17. INCOME TAXES:
As of December 31, 1995, CYTOGEN had federal net operating loss
carryforwards of approximately $123 million. The Company also had federal and
state research and development tax credit carryforwards of approximately $5
million. The net operating loss and credit carryforwards have begun to expire
in 1995.
The Tax Reform Act of 1986 contains provisions that limit the utilization of
net operating loss and tax credit carryforwards if there has been an
"ownership change". Such an "ownership change" as described in Section 382 of
the Internal Revenue Code may limit the Company's utilization of its net
operating loss and tax credit carryforwards.
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>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 41,800 $ 34,000
Capitalized research and development expenses.......... 19,300 16,000
Research and development credit........................ 5,000 4,000
Reacquisition of technology and marketing rights....... 1,500 1,500
Inventory reserves..................................... 2,800 1,000
Other, net............................................. 830 -
-------- --------
Total deferred tax assets............................ 71,230 56,500
Valuation allowance for deferred tax assets.......... (71,230) (56,500)
-------- --------
Net deferred tax assets............................ $ - $ -
======== ========
</TABLE>
In 1995, CYTOGEN acquired CytoRad (see Note 5) and Cellcor (see Note 2),
both of which have net operating loss carryforwards. Approximately $20 million
of these carryforwards may be available to offset future taxable income. An
additional net operating loss carryforward may be available in certain
circumstances. A 100% valuation allowance was established on the acquisition
dates as realization of these tax assets is uncertain.
52
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. COMMITMENTS AND CONTINGENCIES:
The Company leases its facilities and certain equipment under non-cancelable
operating leases which expire at various times through 2003. Rent expense
incurred on these leases was $1.2 million, $1.2 million and $1.3 million in
1995, 1994 and 1993, respectively. Minimum future obligations under the
operating leases total $8.4 million as of December 31, 1995 and will be paid
as follows: $2.0 million in 1996, $1.6 million in 1997, $1.3 million in 1998,
$1.3 million in 1999, $0.9 million in 2000 and an aggregate of $1.3 million in
2001 through 2003.
The Company has an agreement which provides for equipment lease financings.
As of December 31, 1995, the Company has $1.1 million in sale-leaseback
refinancings of which approximately $400,000 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 $150,000 at December 31, 1995 and will be paid in
1996.
The Company is obligated to make minimum future payments under research and
development contracts which expire at various times. As of December 31, 1995,
the minimum future payments under contracts with fixed terms totalled $342,000
and will be paid as follows: $312,000 in 1996, $26,000 in 1997 and $4,000 in
1998. Under contracts whose expirations are not fixed, the annual minimum
payments are $41,000 in 1996, $56,000 in 1997, $66,000 in 1998, $76,000 in
1999, $86,000 in 2000 and thereafter. In addition, the Company is obligated to
pay royalties on revenues from commercial products developed from the
research, including certain guaranteed minimum payments.
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 is expected 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.
19. LITIGATION:
On November 18, 1994, final approval was given to the settlement of the 1992
class action securities 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 CYTOGEN 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.
53
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
SCHEDULE II
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, 1995:
Allowances for
doubtful accounts
receivable.......... $526,000 $ 10,000 $ - $ - $536,000
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Allowances for
doubtful accounts
receivable.......... $526,000 $ - $ - $ - $526,000
FOR THE YEAR ENDED
JANUARY 1, 1994:
Allowances for
doubtful accounts
receivable.......... $263,000 $263,000 $ - $ - $526,000
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<C> <S> <C>
10.16.3 Second Amendment to the Option Agreement between CYTOGEN Corporation and
Fletcher Capital Markets, Inc., dated November 15, 1995.
10.26 Description of arrangement with Somerest Central Corporation.
10.30 CYTOGEN Corporation 1995 Stock Option Plan.
10.31 Research and Development and Option Agreement, dated December 14, 1995,
between CYTOGEN Corporation and Elan Corporation, plc.**
10.32 Distribution Agreement, dated December 22, 1995, between CYTOGEN Corporation
and Faulding (Canada) Inc.**
10.33 Distribution Agreement, dated January 16, 1996, between CYTOGEN Corporation
and CIS biointernational.**
10.34 Severance Agreement effective as of January 1, 1994 between CYTOGEN Corporation and
Thomas J. McKearn, M.D., Ph.D.
10.35 Description of Severance Agreement with Richard J. Walsh.
10.36 Horosziewicz - CYTOGEN Agreement, dated April 20, 1989, between CYTOGEN
Corporation and Julius S. Horosziewicz, M.D., DMSe.**
21 Subsidiaries of CYTOGEN Corporation
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule (Submitted to SEC only in electronic format)
</TABLE>
** 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.
-65-
<PAGE>
Exhibit 10.16.3
SECOND AMENDMENT TO OPTION AGREEMENT
------------------------------------
This Second Amendment to the Option Agreement dated as of May 6, 1994
(the "Original Agreement") by and between CYTOGEN CORPORATION, a Delaware
corporation (the "Company"), and FLETCHER CAPITAL MARKETS, INC., a New York
corporation (the "Investor"), is dated as of the 15th day of November, 1995.
WHEREAS, the Company and the Investor have entered into an Amended and
Restated Investment Agreement dated as of May 6, 1994 (the "Investment
Agreement") providing for the issue and sale by the Company to the Investor of
an aggregate of 1,400,000 shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"); and
WHEREAS, the Investor (or its assignees) has acquired all 1,400,000
shares of the Common Stock pursuant to the terms of the Investment Agreement;
and
WHEREAS, on July 28, 1995, the Investor delivered an Election Notice
to the Company whereby the Investor exercised its option to purchase an
additional 1,800,000 shares of Common Stock at an aggregate purchase price of
$7,304,400.00, or $4.058 per share; and
WHEREAS, the parties entered into an Amendment to Option Agreement
(the "First Amendment"), dated August 10, 1995, pursuant to which the Company
extended the Expiration Date of the
<PAGE>
Option and permitted the Investor to acquire additional shares of Common Stock
at the Per Share Exercise Price and upon the other terms and conditions set
forth in the Original Agreement.
WHEREAS, on November 14, 1995, the Investor delivered an Election
Notice to the Company whereby the Investor exercised its option to purchase an
additional 500,000 shares of Common Stock at an aggregate purchase price of
$2,348,000.00 or $4.696 per share; and
WHEREAS, the parties hereto wish to further extend the Expiration Date
of the Option and to permit the Investor to acquire additional shares of Common
Stock at the Per Share Exercise Price and upon the other terms and conditions
set forth in the Original Agreement.
NOW, THEREFORE, in consideration of the Investor's exercise of its
option and the premises and the mutual agreements herein set forth, the parties
hereto agree as follows:
Section 1. All capitalized terms used herein and not defined shall
have the respective meanings ascribed to them in the Original Agreement.
-2-
<PAGE>
Section 2. Section 1 of the Original Agreement (as amended by the
First Amendment) is hereby deleted and restated to read in its entirety as
follows:
Grant of Option. The Company hereby grants to the Investor an
---------------
irrevocable option (the "Option") to purchase up to the number of
shares of Common Stock specified in Section 2 below (the "Option
Shares") at the Exercise Price (as defined herein). The Option may be
exercised by the Investor, in whole or in part and from time to time,
after the Second Closing and prior to the Expiration Date (as defined
below), by delivering an Election Notice (as defined below) to the
Company; provided, that, if at any time following 180 days after the
--------
date of the Second Closing, any person shall commence a tender offer
for Common Stock and such tender offer shall contain a condition that
the Investor shall not exercise the Option prior to the consummation
of such tender offer, then the Investor shall not thereafter deliver
an Election Notice to the Company until such tender offer has been
consummated or abandoned. The Option shall expire on February 15,
1996 (the "Expiration Date").
-3-
<PAGE>
Section 3. Section 2 of the Original Agreement (as amended by the
First Amendment) is hereby deleted and restated to read in its entirety as
follows:
Right to Exercise Option, Number of Shares, Exercise Price. Subject
----------------------------------------------------------
to the provisions of this Option Agreement, the Investor shall have
the right to purchase from the Company, and the Company shall issue
and sell to the Investor the Option Shares, in whole or in part and
from time to time, but with a minimum of the lesser of, (i) 500,000
shares of Common Stock, or (ii) the remaining Option Shares available
under the Option Agreement in each Election Notice, at the Per Share
Exercise Price (as defined in this Section). The number of shares of
Common Stock that shall constitute the Option Shares shall be
3,300,000. The Investor shall be entitled to exercise the Option on
any Exercise Dates prior to the Expiration Date, on which dates the
Investor shall be entitled to elect to purchase all or any portion of
the Option Shares. The Per Share Exercise Price shall be equal to the
product of (i) the average per share daily closing price of the Common
Stock as reported on the Nasdaq National Market ("Nasdaq") for the
period beginning sixty (60) trading
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<PAGE>
days prior to an Exercise Date and ending on the Nasdaq trading day
next preceding the Exercise Date, and (ii) 0.95.
The Company shall use its best efforts to keep the Registration
Statement (as defined in the Investment Agreement) continuously
effective from the date on which it is first declared effective
through the date of the Option Closing. In the event that the
Investor wishes to exercise all or part of the Option, Investor shall
deliver to the Company a written notice substantially in the form
attached hereto as Exhibit A (the "Election Notice"). The Election
Notice shall specify the number of Option Shares the Option is being
exercised for.
Section 4. Except as specifically set forth herein, the terms and
conditions of the Original Agreement remain unchanged and in full force and
effect.
Section 5. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
CYTOGEN CORPORATION
By:/s/ T.J. Madison
---------------------------
FLETCHER CAPITAL MARKETS, INC.
By:/s/ Vern O. Sedlacek
---------------------------
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<PAGE>
Exhibit 10.26
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 agreement between the Company and Somerset Central Corporation, a New
Jersey corporation of which Mr. Madison is the sole stockholder and an officer
and director. The arrangement calls for monthly payments of $13,750 plus
expenses. For the year ended December 31, 1995, the Company recorded
approximately $208,000 for services rendered and expenses reimbursed under the
arrangement. The amount paid in respect of 1995 includes a one-time, $31,000
special fee earned for effecting certain specified events.
<PAGE>
Exhibit 10.30
CYTOGEN CORPORATION
1995 STOCK OPTION PLAN
Date Adopted: March 28, 1995
<PAGE>
CYTOGEN CORPORATION
1995 STOCK OPTION PLAN
1. Purpose; Effective Date.
(a) The purposes of this Plan are to further the interests of Cytogen
Corporation (the "Company") by retaining the services of persons now serving as
officers and other employees of the Company, attracting and retaining the
services of persons capable of serving as officers and employees of the Company
and providing incentives for such employees to exert maximum efforts to promote
the success of the Company.
(b) The effective date of this Plan is March 28, 1995. This Plan will
become effective on that date, subject to approval of the Plan not later than
September 30, 1995 by a majority of the votes cast at a duly held stockholders
meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting on the Plan. Nothing
in this Plan shall affect the rights or obligations of holders of options
granted under any other Company stock option plan.
2. Definitions.
Whenever used in this Plan, the following terms will have the meanings set
forth in this paragraph:
"Board of Directors" means the Board of Directors of the Company.
--------------------
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
------
"Committee" means the committee described in paragraph 3.
-----------
"Common Stock" means the common stock, par value $. 01 per share, of the
--------------
Company.
"Date of Grant" means with respect to any Option the date the Committee
---------------
approves the grant of the Option or such later date as may be specified by the
Committee as the date the option will become effective.
"Disinterested Director" means a member of the Board who is a "disinterested
------------------------
person" within the meaning of Rule 16b-3(d)(3) under the Securities Exchange Act
of 1934, or any successor provision.
"Employee" means any person employed by the Company (including, without
----------
limitation, a person employed by the Company who is also an officer or director
of the Company).
<PAGE>
"Exercise Price" means with respect to any Option the price per share which
----------------
must be paid upon exercise of the Option.
"Fair Market Value" means (i) if the Common Stock is traded in a market in
-------------------
which actual transactions are reported, the mean of the high and low prices at
which the Common Stock is reported to have traded on the relevant date in all
markets on which trading in the Common Stock is reported, or if there is no
reported sale of the Common Stock on the relevant date, the mean of the highest
reported bid price and lowest reported asked price for the Common Stock on the
relevant date, (ii) if the Common Stock is Publicly Traded but only in markets
in which there is no reporting of actual transactions, the mean of the highest
reported bid price and the lowest reported asked price for the Common Stock on
the relevant date, or (iii) if the Common Stock is not Publicly Traded, the
value of a share of Common Stock as determined by the most recent valuation
prepared by an independent expert at the request of the Committee.
"Incentive Stock Option" means any Option that at the time of the grant
------------------------
qualifies and is designated as an incentive stock option within the meaning of
Section 422 of the Code.
"Non-Qualified Option" means any Option that is not an Incentive Stock
----------------------
Option.
"Option" means any Incentive Stock Option or Non-Qualified Option granted
--------
under this Plan.
"Option Agreement" means an agreement in such form as may be determined by
------------------
the Committee, executed and delivered by the Company to the holder of any Option
with respect to that Option.
"Outside Director" means a member of the Board who is not a current employee
------------------
of the Company (or a related entity), is not a former employee who is receiving
compensation for prior services (other than benefits under a tax-qualified
retirement plan), was not an officer of the Company at any time, and is not
currently receiving remuneration, either directly or indirectly, in any capacity
other than as a director.
"Plan" means the Cytogen Corporation 1995 Stock Option Plan.
------
"Publicly Traded" means, with respect to any class of stock, that the
-----------------
class of stock is required to be registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or that stock of that class has been sold
within the preceding 12 months in an underwritten public offering.
"Ten Percent Shareholder" means, with respect to the grant of any Option, a
-------------------------
person who at the Date of Grant is the beneficial owner of stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company.
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<PAGE>
"Termination of Employment" means the time when the employee-employer
---------------------------
relationship between an Employee and the Company ceases to exist for any reason,
or the time when an officer who is not also an Employee ceases to be an officer
of the Company for any reason, including, but not limited to, a termination by
resignation, discharge, death, Total Disability or retirement. Any leave of
absence taken with the consent of the Company for a period of not more than 90
days shall not be a Termination of Employment, or if longer, so long as the
optionee's right to reemployment with the Company is guaranteed by contract. If
the period of leave exceeds 90 days and if the right to reemployment is not
guaranteed by contract, the Termination of Employment will be deemed to occur on
the 91st day of the leave.
"Total Disability" means inability of an Employee to engage in any
------------------
substantial gainful activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
All determinations as to the date and extent of disability of an Employee will
be made by the Committee.
3. Administration.
(a) This Plan shall be administered by a Committee, which shall be composed
of not less than two Outside Directors who are also Disinterested Directors. The
Committee may, from time to time, adopt or rescind rules and regulations for
carrying out the provisions and purposes of this Plan. Subject to the express
provisions of this Plan, the Committee shall have sole authority, in its
absolute discretion, to determine which Employees shall receive Options, the
time when Options shall be granted, the terms and provisions of the Options
(which may differ from one another) and to do everything necessary or
appropriate to administer this Plan, including, without limitation, interpreting
the provisions of this Plan and the Options. All determinations made by the
Committee with respect to this Plan and the Options shall be final, binding and
conclusive.
(b) No member of the Committee shall be liable for any act or omission of
the Committee or any other member of the Committee, or for any act or omission
on his own part, in connection with the administration of this Plan, unless it
resulted from the member's own willful misconduct.
4. Persons Eligible to Receive Options.
(a) Options may be granted under this Plan only to persons who at the Date
of Grant either (i) are officers or Employees of the Company or (ii) have agreed
to become officers or Employees of the Company, and, in either case, are
determined by the Committee to be of substantial importance to the Company.
(b) Options granted to persons who are not yet officers or Employees at the
Date of Grant may not be exercised until the optionee has become an officer or
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<PAGE>
Employee, and shall expire if the optionee fails to commence service as an
officer or Employee within six months (or such other period as the Committee may
determine) after the Date of Grant.
(c) Incentive Stock Options may be granted only to persons who are salaried
Employees at the Date of Grant, and only on such terms as are provided in
paragraphs 6, 7 and 8 hereof.
(d) No Employee to whom Options may be granted under this Plan may be
granted Options to purchase more than 200,000 shares in any one calendar year.
5. Stock Subject to the Plan.
(a) Subject to any adjustment as provided in paragraph 9, the maximum
number of shares of Common Stock as to which Options may be granted under this
Plan is 2,402,635 shares reduced by the number of outstanding options granted
under the Cytogen Corporation 1989 Employee Stock Option Plan (the "1989 Plan")
that are exercised after the effective date of this Plan. If any Option expires
or is cancelled or surrendered without being exercised in full, the number of
shares as to which the Option is not exercised will once again become shares as
to which new Options may be granted. The Common Stock which is issued on
exercise of Options may be authorized but unissued shares or shares which have
been issued and reacquired by the Company.
(b) For administrative purposes only, the Committee shall establish
the following two accounts: (i) an account indicating the number of shares of
Common Stock as to which Options may then be granted under the Plan (the
"Current Account"), and (ii) a reserve account showing the number of shares of
Common Stock as to which Options may not then be granted under the Plan (the
"Reserve Account"). The Committee may issue Options only with respect to the
shares of Common Stock credited to the Current Account. The Current Account
shall initially be credited with 1,106,815 shares of Common Stock and the
Reserve Account shall initially be credited with 1,295,820 shares of Common
Stock. After the effective date of this Plan: (i) in addition to appropriate
adjustments for Options granted hereunder, the Current Account shall be credited
with one share of Common Stock for each share of Common Stock subject to an
outstanding option granted under the 1989 Plan that expires, is cancelled or
surrendered without being exercised in full, and (ii) the Reserve Account shall
be debited by one share of Common Stock for each share of Common Stock subject
to an outstanding option granted under the 1989 Plan that (a) is exercised after
the effective date of this Plan, or (b) expires, is cancelled or surrendered
without being exercised in full.
6. Grants of Options.
(a) Subject to paragraph 4(d), the Committee will have complete
discretion to determine when, and to which officers or other Employees, Options
are to be granted, the number of shares of Common Stock to which Options granted
to each officer or
-4-
<PAGE>
other Employee will relate, whether and to what extent Options granted to an
officer or other Employee will be Incentive Stock Options or Non-Qualified
Options and, subject to the provisions of paragraphs 7 and 8, the Exercise Price
and the term of each Option. The Committee may, in its discretion at the time
of granting the Option, provide that the Exercise Price may be paid in cash, by
the surrender of Common Stock, by an interest-bearing promissory note, or by
other means; subject, however, to any requirements of applicable law which may
limit the type or amount of such non-cash consideration. If payment by
promissory note is permitted: (i) the optionee shall be required to make a cash
payment upon exercise of the Option of not less than 20% of the Exercise Price;
(ii) the note shall provide for full recourse against the maker; and (iii) the
note shall be payable in full prior to its stated maturity upon the optionee's
Termination of Employment for any reason other than death or Total Disability.
(b) Any Options which are not designated as Incentive Stock Options when
they are granted will be Non-Qualified Options.
(c) Promptly after the Date of Grant of each Option, the Company shall
cause an Option Agreement to be executed and delivered to the holder of the
Option. The Option Agreement shall clearly state whether the Option granted is
or is not an Incentive Stock Option. Separate Option Agreements shall be used
for Incentive Stock Options and Non-Qualified Stock Options.
(d) Except as otherwise determined by the Committee, and subject to the
requirements of applicable law, the entire Exercise Price received by the
Company upon the exercise of an option shall constitute stated capital to the
extent of the aggregate par value of the Common Stock issued upon exercise of
the Option.
(e) Any Option granted under this Plan prior to the date the Plan is
approved by the Company's stockholders shall not be exercisable unless and until
the Plan is so approved.
7. Option Provisions.
(a) Exercise Price. No consideration shall be payable by any optionee for
the grant of an Option. Subject to the provisions of paragraph 8, the Exercise
Price of each Option will be as determined by the Committee. The Exercise Price
of a Non-Qualified Option may be less than the Fair Market Value of the Common
Stock on the Date of Grant of the Option.
(b) Term. The term of each Option will be as determined by the Committee,
but in no event will the term of an Option be longer than ten years from the
Date of Grant, or five years in the case of an Incentive Stock Option granted to
a Ten Percent Shareholder. Options may not be exercised before six months after
the Date of Grant. Options will cease to be exercisable prior to the expiration
of their term under certain circumstances as provided in paragraphs 7(f), (g),
and (h). Subject to the foregoing, and
-5-
<PAGE>
to any vesting or other conditions imposed at the time it is granted, an Option
may be exercised in whole or in part at any time, or from time to time, during
its term.
(c) Manner of Exercise. To exercise an Option, the person exercising
the Option must deliver to the Company, at its principal office:
(i) a notice of exercise, which states the extent to which the Option
is being exercised;
(ii) a certified or bank cashier's check in an amount, or Common
Stock with a Fair Market Value, equal to the Exercise Price of the Option
times the number of shares as to which it is being exercised, or
consideration in such other form as may be permitted under the terms on
which the Option is granted; and
(iii) a certified or bank cashier's check equal to any withholding
taxes the Company is required to pay because of the exercise of the Option.
The Committee may permit an Employee, as an alternative to making the payment
described in clause (iii), to authorize the Company to withhold a sum equal to
the withholding taxes the Company is required to pay from the Employee's salary
and bonus payments over a period of not more than six months (or such longer
period as the Company may approve). The date on which the Company receives all
the items specified in this subsection will be the date on which the Option is
exercised to the extent described in the notice of election.
(d) Delivery of Stock Certificates. As promptly as practicable after an
Option is exercised, the Company will deliver to the person who exercises the
Option certificates, registered in that person's name, representing the number
of shares of Common Stock which were purchased by the exercise of the Option.
Each certificate may bear a legend to indicate, if applicable, that (i) the
Common Stock represented by the certificate was issued in a transaction which
was not registered under the Securities Act of 1933, as amended, and may only be
sold or transferred in a transaction which is registered under that Act or is
exempt from the registration requirements of that Act, and (ii) the Common Stock
represented by the certificate is subject to the obligation of the holder to pay
any unpaid balance of the Exercise Price (whether pursuant to a promissory note
or otherwise), and/or that the Common Stock is pledged to secure such an
obligation.
(e) Nontransferability of Options. During the lifetime of the person to
whom an Option is issued, the Option may be exercised only by that person or his
or her guardian or legal representative. An Option may not be assigned, pledged
or hypothecated in any way, will not be subject to execution, and will not be
transferable otherwise than by will or the laws of descent and distribution.
The Company will not recognize any attempt to assign, transfer, pledge,
hypothecate or otherwise dispose of an Option contrary to the provisions of this
Plan, or any levy of any attachment or similar process upon any Option, and,
except as expressly stated in this Plan, the Company will
-6-
<PAGE>
not be required to, and will not, issue Common Stock on exercise of an Option to
anyone who claims to have acquired that Option from the person to whom it was
granted.
(f) Termination of Employment of Holder of Option Other Than Because of
Total Disability or Death. If there is a Termination of Employment of a person
to whom an Option has been granted, other than by reason of the person's death
or Total Disability, each Option held by the person may be exercised (if
otherwise exercisable) until the earlier of (i) the end of the three-month
period immediately following the date of the Termination of Employment, (ii) the
expiration of the term specified in the Option, or (iii) such earlier time as
may be determined by the Committee at the time of granting the Option.
(g) Total Disability of Holder of Option. If there is a Termination of
Employment of a person to whom an Option has been granted by reason of his or
her Total Disability, each Option held by the person may be exercised (if
otherwise exercisable) until the earlier of (i) the end of the one-year period
immediately following the date of the Termination of Employment, (ii) the
expiration of the term specified in the Option, or (iii) such earlier time as
may be determined by the Committee at the time of granting the Option.
(h) Death of Holder of Option. If there is a Termination of Employment of
a person to whom an Option has been granted by reason of his or her death, or a
former officer or Employee dies following the date of his or her Termination of
Employment but at a time when an Option still would be exercisable by that
person but for the death of the person, each Option held by the person at the
time of his or her death may be exercised by the person or persons to whom the
Option passed by will or by the laws of descent and distribution (but by no
other persons) until the earlier of (i) the end of the one-year period
immediately following the date of death (or such other period as may be
determined by the Committee at the time of granting the Option), (ii) the
expiration of the term specified in the Option, or (iii) if the death occurs
after the Termination of Employment, the end of the period in which the Option
could be exercised under paragraph 7(f) or (g).
8. Special Provisions Relating to Incentive Stock Options.
No Incentive Stock Option may be granted after March 27, 2005. The
Exercise Price of an Incentive Stock Option will be not less than 100% of the
Fair Market Value of the Common Stock on the Date of Grant of the Option. An
Incentive Stock Option may not be granted to a person who, at the time the
Option is granted, is a Ten Percent Shareholder, unless (i) the Exercise Price
of the Option is at least 110% of the Fair Market Value of the Common Stock on
the Date of Grant and (ii) the Option by its terms is not exercisable after the
expiration of five years from the Date of Grant. To the extent that the
aggregate Fair Market Value (determined at the time an Incentive Stock Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
first exercisable by an Employee during any calendar year (under this Plan and
any
-7-
<PAGE>
other incentive stock option plans of the Company) exceeds $100,000, such
Options shall be treated as Non-Qualified Options.
9. Recapitalization.
(a) The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business or any other corporate act or proceeding, whether
of a similar character or otherwise. Unless otherwise determined by the Board,
the issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or on conversion of shares or obligations of the
Company convertible into such shares or other securities, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number, class
or price of shares of Common Stock then subject to outstanding Options.
(b) If as a result of any (i) reorganization or liquidation of the Company
or (ii) reclassification of the Company's capital stock, or (iii) consolidation
or merger of the Company with or into another corporation, or sale of all or
substantially all the assets of the Company (a reorganization or liquidation of
the Company or reclassification of the Company's capital stock, or a merger,
consolidation or sale of the type described in this subsection being a
"Corporate Transaction") while an Option is outstanding, the holders of the
Common Stock become entitled to receive with respect to their Common Stock,
securities or assets other than, or in addition to, their Common Stock, upon
exercise of that Option the holder will receive what the holder would have owned
if the holder had exercised the Option immediately before the Corporate
Transaction which occurred while the Option was outstanding and had not disposed
of anything the holder would have received as a result of that and all
subsequent Corporate Transactions.
10. Rights of Option Holder.
(a) The holder of an Option will not have any rights as a stockholder by
reason of holding that Option. Upon exercise of an Option, the holder will be
deemed to acquire the rights of a stockholder when, but not before, the issuance
of Common Stock as a result of the exercise is recorded in the stock records of
the Company.
(b) Nothing in this Plan or in the grant of an Option will confer upon any
Employee the right to continue in the employment of the Company or will
interfere with or restrict in any way the rights of the Company to discharge any
Employee at any time
-8-
<PAGE>
for any reason whatsoever, with or without cause, nor will it impose any
obligation on the Employee to remain in the employ of the Company.
11. Laws and Regulations.
The obligation of the Company to sell and deliver shares of Common Stock on
exercise of Options will be subject to the condition that legal counsel for the
Company be satisfied that the sale and delivery will not violate the Securities
Act of 1933, as amended, or any other applicable laws, rules or regulations.
12. Withholding of Taxes.
(a) In addition to the requirement in paragraph 7(c) that in order to
exercise an Option a person must make a payment to the Company or authorize
withholding in order to enable the Company to pay any withholding taxes due as a
result of the exercise, if a person who exercised an Incentive Stock Option
disposes of shares of Common Stock acquired through exercise of that Incentive
Stock Option either (i) within two years after the Date of Grant of the
Incentive Stock Option or (ii) within one year after the issuance of the shares
on exercise of the Incentive Stock Option, the person will notify the Company
promptly of the occurrence of the event and, if the event was a disposition of
Common Stock acquired on exercise of an Incentive Stock Option, the amount
realized upon the disposition.
(b) If, whether because of a disposition of Common Stock acquired on
exercise of an Incentive Stock Option, or otherwise, the Company is required to
pay withholding taxes to any Federal, state or other taxing authority and the
Employee fails to provide the Company with the funds with which to pay that
withholding tax, the Company may withhold up to 50% of each payment of salary or
bonus to the Employee (which will be in addition to any other required or
permitted withholding), until the Company has been reimbursed for the entire
withholding tax it was required to pay.
(c) The obligations contained in this paragraph 12 shall bind each
optionee, and each optionee, by accepting and/or exercising an Option, shall be
deemed to agree to observe and comply with them.
13. Reservation of Shares.
The Company will at all times keep reserved for issuance on exercise of
Options a number of authorized but unissued or reacquired shares of Common Stock
equal to the maximum number of shares the Company may be required to issue on
exercise of outstanding Options (assuming no subsequent adjustments under
paragraph 9).
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<PAGE>
14. Amendment of the Plan.
The Board of Directors may at any time and from time to time modify or
amend this Plan in any respect effective at any date the Board of Directors
determines; provided, that without the approval of the stockholders of the
Company the Board of Directors may not, (i) except as provided in paragraph 9,
increase the maximum number of shares of Common Stock which may be issued on
exercise of Options granted under this Plan; (ii) change the categories of
persons eligible to receive Options; (iii) increase the per-employee limit
specified in paragraph 4(d), or (iv) take any other action requiring the
approval of the stockholders of the Company in order to maintain the exemption
available under Rule 16b-3 (or any similar rule) of the Securities and Exchange
Commission. No modification or amendment of this Plan will, without the consent
of the holder of an outstanding Option, adversely affect the holder's rights
under that Option.
15. Interpretation
The Committee shall have the power to interpret the Plan and to make and
amend rules for putting it into effect and administering it. It is intended
that the Incentive Stock Options granted under the Plan shall constitute
incentive stock options within the meaning of section 422 of the Code, that the
Non-Qualified Options shall constitute property subject to federal income tax
pursuant to the provisions of section 83 of the Code and that the Plan shall
qualify for the exemption available under Rule 16b-3 (or any similar rule) of
the Securities and Exchange Commission. It is also intended that all
compensation income recognized by optionees as the result of the exercise of
Options or the disposition of Common Stock acquired on exercise of Options shall
be considered performance-based compensation excludable from such optionee's
"applicable employee remuneration" pursuant to section 162(m)(4)(C) of the Code.
The provisions of the Plan shall be interpreted and applied insofar as possible
to carry out such intent.
16. Termination of the Plan.
This Plan shall terminate on March 27, 2005 unless sooner terminated. The
Board of Directors may suspend or terminate this Plan at any time or from time
to time, but no such action may adversely affect the rights of a person holding
an outstanding Option.
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<PAGE>
Exhibit 10.31
RESEARCH AND DEVELOPMENT
AND OPTION AGREEMENT
This Agreement dated as of December 14, 1995, (the "Agreement") by and
between CYTOGEN CORPORATION ("Cytogen"), a Delaware corporation, having its
place of business at 600 College Road East, Princeton, NJ 08540-5308, and ELAN
CORPORATION, plc ("Elan"), organized and existing under the laws of Ireland,
having its place of business at Monksland, Athlone, County Westmeath, Ireland.
WHEREAS, Cytogen has developed a genetic diversity library technology
which, among other things, may be utilized to discover peptide molecules which
target certain cell receptors; and
WHEREAS, Elan has developed drug delivery technologies including,
without limitation, encapsulation technologies which have been shown to
facilitate the transport of a spectrum of drugs across a variety of biological
barriers, including, without limitation, intestinal epithelium, pulmonary
epithelium, dermis, vascular endothelium and the blood brain barrier; and
WHEREAS, Elan has developed in vitro screening assays to characterize
--------
the transport of drugs, including peptides, across a variety of biological
barriers; and
WHEREAS, Elan has developed a phage display and combinatorial library
technology which, among other things, may be utilized to discover peptide
molecules which target certain cell receptors or facilitate the transport of a
drug across a Biological Barrier (as hereinafter defined), which technology
<PAGE>
will not be utilized as part of the Research Program (as hereinafter defined);
and thus this Agreement shall not be construed as granting Cytogen any right or
license to peptides discovered by Elan using Elan's phage display and
combinatorial library technology; and
WHEREAS, discussions between representatives of both parties have been
held concerning the combination of Cytogen's GDL Technology, as hereinafter
defined, and Elan's Technology, as hereinafter defined, to develop a novel drug
delivery approach; and
WHEREAS, as both parties desire to implement a collaborative research
program to demonstrate enhanced absorption in vivo of a drug across a Biological
-------
Barrier, as hereinafter defined, in an animal model using the GDL Patents and
GDL Technology, as hereinafter defined, and Elan Patents and Elan Technology, as
hereinafter defined.
NOW THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Definitions. Unless otherwise provided, each capitalized term used
-----------
herein shall have the following meanings.
1.1 "Affiliate(s)" shall mean, with respect to a party to this
Agreement, any corporation, partnership or organization which directly or
indirectly controls, is controlled by or is under common control with such
party. Existence of such control
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<PAGE>
is established by the direct or indirect ownership of more than 50% of the
voting interest in an entity.
1.2 "Biological Barrier" shall mean the intestinal epithelium, the
pulmonary epithelium, the blood-brain barrier, and the dermis.
1.3 "Cytogen Products" shall mean Products that are not covered by
one or more claims, or produced, processed, or otherwise manufactured by any
method and/or process covered by one or more claims, of an application or patent
within the Elan Patents or the Program Patents relating to the Elan Patents or
the Elan Technology.
1.4 "Cytogen Program Patents" shall mean Program Patents conceived or
made solely by one or more Cytogen employees.
1.5 "Cytogen Program Technology" shall mean Program Technology that
(a) is related to the GDL Patents or GDL Technology; and (b) is unrelated to the
Elan Patents or Elan Technology.
1.6 "Elan Patents" shall mean inventions owned or controlled by or
licensed to Elan that are directed to in vivo drug delivery methods and drug
delivery systems, including without limitation, drug encapsulation methods and
systems, or biological systems designed to assay biological agents, including
without limitation, peptides, with respect to their transport, toxicity,
(including without limitation, inflammation), absorption, or adsorption
properties; all United States and
- 3 -
<PAGE>
foreign patent applications which may be filed covering such inventions, as well
as continuations, continuations-in-part, divisions and renewals thereof; all
United States and foreign patents which may be granted thereon, and all
reissues, reexamined patents, and extensions thereof. A list of the Elan
Patents shall be promptly furnished to Cytogen at its request at any time during
the Research Program Period.
1.7 "Elan Products" shall mean Products that are not covered by one
or more claims, or produced, processed, or otherwise manufactured by any method
and/or process covered by one or more claims, of an application or patent within
the GDL Patents or of the Program Patents that relate to the GDL Patents or GDL
Technology. Moreover, Elan Products shall not include any Product containing a
peptide or a molecule derived from such peptide, in which the peptide was
identified from a peptide library in the performance of the Research Program, in
which such peptide, peptide library, or method of identification is covered by
one or more claims of an application or patent within the GDL Patents or the
Program Patents that relate to the GDL Patents or GDL Technology.
1.8 "Elan Program Patents" shall mean Program Patents conceived or
made solely by one or more Elan employees.
1.9 "Elan Program Technology" shall mean Program Technology that (a)
is related to the Elan Patents or Elan Technology; and (b) is unrelated to the
GDL Patents or GDL Technology.
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<PAGE>
1.10 "Elan Technology" shall mean all Technology related to one or
more inventions within the Elan Patents, that is owned or controlled by or
licensed to Elan, the subject matter of which is in vivo drug delivery methods
-------
and drug delivery systems, including without limitation, drug encapsulation
methods and systems, or biological systems designed to assay biological agents,
including without limitation, peptides, with respect to their transport,
toxicity, (including, without limitation, inflammation), absorption, or
adsorption properties.
1.11 "Field" shall mean the treatment of human disease and human
disorders.
1.12 "GDL Patents" shall mean the patent applications identified in
Schedule A annexed hereto, and all continuations, continuations-in-part,
divisions and renewals thereof; all United States and foreign patents which may
be granted thereon, and all reissues, reexamined patents, and extensions
thereof, as well as the inventions described and claimed therein, that are owned
or controlled by or licensed to Cytogen with the right to sublicense. Schedule
A shall be updated from time-to-time.
1.13 "GDL Technology" shall mean all Technology related to one or
more inventions within the GDL Patents, that is owned or controlled by or
licensed to Cytogen with the right to sublicense.
1.14 "Joint Program Patents" shall mean Program Patents conceived or
made jointly by (i) one or more Elan employees; and (ii) one or more Cytogen
employees.
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<PAGE>
1.15 "Know-How Product" shall mean any product that (a) is contained
within Program Technology; or (b) is produced, processed or otherwise
manufactured by any method and/or process contained within the Program
Technology.
1.16 "Option Period" shall mean the period commencing on the date
hereof and continuing until ninety (90) days after the Research Program
Termination Date, as may be extended pursuant to Section 4.2 hereof.
1.17 "Product" shall mean any product which, at the time of
manufacture, use or sale is either (a) covered by one or more pending claims of
an application or one or more Valid Claims of a patent within the Program
Patents; or (b) produced, processed, or otherwise manufactured by any method
and/or process covered by one or more pending claims of an application or one or
more Valid Claims of a patent within the Program Patents; or (c) contains a
peptide or a molecule derived from such peptide, in which the peptide was
identified from a peptide library in the performance of the Research Program,
and in which such peptide, peptide library, or method of identification is
covered by one or more pending claims of an application or one or more Valid
Claims of a patent within the GDL Patents or Program Patents.
1.18 "Program Patents" shall mean (a) all inventions which are
conceived or made at any time during the Research Program in connection with any
research conducted under the Research Program; and (b) all United States and
foreign patent applications which may be filed covering such inventions, as well
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<PAGE>
a continuations, continuations-in-part, divisions and renewals thereof; all
United States and foreign patents which may be granted thereon, and all
reissues, reexamined patents, and extensions thereof.
1.19 "Program Technology" shall mean all technical information
pertaining to the Research Plan of Exhibit A including all inventions, formulas,
methods, plans, processes specifications, characteristics, equipment, design,
know-how, experience and trade secrets which the participants in the Research
Plan may discover or learn in connection with their respective work for or
participation in the Research Program, to the extent that, as of its date of
disclosures to both parties, is not (a) already known to one of the parties; (b)
disclosed in the published literature; (c) generally available to industry; or
(d) obtained by one of the parties from a third party without binder of secrecy,
provided, however, that such third party has no confidentiality obligation to
- -------- -------
the other party or any of its affiliates with respect to such information. All
such information which is characterized as Program Technology shall cease to be
Program Technology when, through no fault or omission of either party hereto,
such information becomes (a) disclosed in the published literature; or (b)
generally available to industry; or (c) obtained by one of the parties from a
third party without binder of secrecy, provided, however, that such third party
-------
has no confidentiality obligation to the other party or any of its affiliates
with respect to such information.
- 7 -
<PAGE>
1.20 "Research Plan" shall mean the Research and Development Plan to
be agreed to by the parties on or before January 8, 1996, a preliminary draft of
which is attached hereto as Exhibit A, and which Plan shall include a specific
schedule for work, milestones and personnel requirements associated with the
development of a drug formulation or formulations that is transported across a
Biological Barrier.
1.21 "Research Program" shall mean all research, experimentation or
development relating to the product proposed to be conducted or conducted by the
parties hereto under the terms of the Research Plan.
1.22 "Research Program Period" shall mean the period commencing on
the date hereof and continuing until the Research Program Termination Date.
1.23 "Research Program Termination Date" shall mean the date of
delivery by Cytogen of the final written research report which summarizes the
data and findings generated during the
"Research Program, which report shall be delivered within thirty (30) days of
the completion of the Research Program, as may be extended pursuant to Section
2.5 hereof.
1.24 "Supervisory Committee" shall mean the committee as described in
Section 2.4 hereof.
1.25 "Technology" shall mean a party's discoveries, processes,
instruments, machines, materials, compositions, test procedures, manufacturing
processes, techniques, formulations, methodologies, data, information,
inventions, and trade secrets,
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<PAGE>
to the extent that, as of the date of disclosure and/or delivery to the other
party ("receiving party") was not (a) known to the receiving party as evidenced
by written documentation; (b) disclosed in published literature; (c) generally
available to industry; or (d) obtained by the receiving party from a third party
without binder of secrecy, provided, however, that such third party has no
-------- -------
confidentiality obligations to the party hereto disclosing the information
("disclosing party") or to any of its Affiliates with respect to such subject
matter. All subject matter which is characterized as Technology shall cease to
be Technology when, through no fault or omission of the receiving party, such
subject matter becomes (a) disclosed in the published literature; or (b)
generally available to industry; or (c) obtained by the receiving party from a
third party without binder of secrecy, provided, however, that such third party
-------- -------
has no confidentiality obligations to the disclosing party or any of its
Affiliates with respect to such subject matter.
1.26 "Territory" shall mean all of the countries in the World.
1.27 "Valid Claim" shall mean a claim of an issued, unexpired Patent
which has not been abandoned, or held invalid in an unappealed or unappealable
final decision rendered by a court of competent jurisdiction.
2. Research Program.
----------------
2.1 Research Plan. Each of the parties hereto shall use all
-------------
commercially reasonable efforts to undertake the Research
- 9 -
<PAGE>
Program in accordance with the Research Plan. Each party shall designate up to
six of its employees as scientific members to the Research Program Council who
will have specific responsibilities designated under this Research Plan. The
Research Plan shall be updated in writing to a revised Research Plan from time-
to-time upon mutual written agreement of the parties.
2.2 Research Funding. Elan shall be responsible for providing all
----------------
funding necessary for both parties to undertake their respective duties and
obligations under the Research Program and all other costs and expenses related
thereto. The total cost of the Research Program shall not exceed Three Million
Dollars ($3,000,000) (the "Research Budget"), with aggregate payments for work
performed by Cytogen not to exceed one Million Five Hundred Thousand Dollars
($1,500,000).
2.3 Payments to Cytogen. During the term of the Research Program,
-------------------
Cytogen shall submit monthly invoices to Elan for all work performed by Cytogen
which shall be billed at the rate of $[*] per hour per person of research time,
inclusive of all taxes (the "Research Fee"), and which invoice shall be
accompanied by documentation sufficient to support the Research Fee set forth in
such invoice. During the initial term of this Agreement, Elan shall have no
obligations to pay Cytogen for any additional expenses or costs other than the
Research Fee. Payment of the Research Fee shall be made by Elan within thirty
(30) days of receipt of an invoice.
* Information omitted and filed separately with the Commission under Rule 24b-2.
- 10 -
<PAGE>
2.4 Research Management. Elan and Cytogen shall establish a
-------------------
Supervisory Committee comprised of a designee of each of Cytogen and Elan, who
shall initially be Thomas J. McKearn and Donal Geaney, or such other members of
senior management as may be appointed by each party and approved by the other.
The Supervisory Committee shall meet periodically and no less than once a
quarter to review the overall conduct and performance of the Research Program.
Each of the parties hereto shall provide to the Supervisory Committee monthly
written reports and data on the status of their work under the Research Program
and such other reports and information as may be requested by the Supervisory
Committee from time to time to perform its duties hereunder. The Supervisory
Committee may make such changes or modifications to the Research Plan as may be
necessary to achieve the milestones set forth therein. Within thirty (30) days
of the completion of the Research Program, as determined by the Supervisory
Committee, Cytogen shall prepare and deliver to the Supervisory Committee a
final written report which summarizes the data and findings arising from both
its work and that of Elan under the Research Program. Elan agrees to cooperate
and provide reasonable assistance to Cytogen in the preparation of such written
report and Elan shall have the opportunity to review the final written report
prior to its submission to the Supervisory Committee.
2.5 Duration and Extension of Research Program. The Research Program
------------------------------------------
shall be conducted for that period of time
- 11 -
<PAGE>
established in the Research Plan. The parties anticipate that the Research
Program shall commence on or about January 3, 1996, and shall continue for a
period of sixteen (16) months. At the written request of Elan, such period may
be extended at any time during the Research Program Period for an additional
period not to exceed one (1) year, provided that any and all costs and expenses
incurred in implementing the Research Program during such extended period shall
be included in a modified research budget to be agreed to by the parties and
shall be the sole responsibility of Elan.
3. Grant of Licenses.
-----------------
3.1 Grant by Cytogen to Elan. Subject to the terms and conditions of
------------------------
the option granted pursuant to Section 4.1 hereof and of any License Agreement
between the parties entered into pursuant to Section 4.3 hereof, Cytogen hereby
grants to Elan:
(a) the exclusive, perpetual, royalty-free right and license
under the Joint Program Patents and Cytogen Program Patents, with the right
to sublicense, to make, use, sell, offer for sale, and import Elan Products
that are covered by one or more claims directed to in vivo drug delivery
systems or directed to methods for in vivo drug delivery of an application
or patent within Program Patents that are related to the Elan Patents or
Elan Technology; and
(b) the exclusive, perpetual, royalty-free right and license
under Program Technology, with the right to
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<PAGE>
sublicense, to make, use, sell, offer for sale, and import products that
(i) are contained within Elan Program Technology; or (ii) are produced,
processed or otherwise manufactured by any method and/or process contained
within the Elan Program Technology.
3.2 Grant by Elan to Cytogen. Subject to the terms
------------------------
and conditions of the option granted pursuant to Section 4.1 hereof and of any
License Agreement between the parties entered into pursuant to Section 4.3
hereof, Elan hereby grants to Cytogen:
(a) the exclusive, perpetual royalty-free right and license
under the Joint Program Patents and the Elan Program Patents, with the
right to sublicense, to make, use, sell, offer for sale, and import
Cytogen Products that are covered by one or more claims of an
application or patent within the Program Patents relating to the GDL
Patents or GDL Technology, that are not directed to in vivo drug
delivery systems or directed to methods for in vivo drug delivery; and
(b) the exclusive, perpetual royalty-free right and license
under Program Technology, with the right to sublicense, to make, use,
sell, offer for sale, and import products that (i) are contained
within Cytogen Program Technology; or (ii) are produced, processed, or
otherwise manufactured by any method and/or process contained within
the Cytogen Program
- 13 -
<PAGE>
Technology, that are not directed to in vivo drug delivery systems or
directed to methods for in vivo drug delivery.
3.3 No Diligence Obligations. Elan shall have no obligation to use
------------------------
diligence or best efforts to exercise the rights and licenses granted Elan
pursuant to Section 3.1 hereof. Cytogen shall have no obligation to use
diligence or best efforts to exercise the rights and licenses granted Cytogen
pursuant to Section 3.2 hereof.
3.4 Exclusion. Nothing contained herein shall be construed as
---------
granting Elan any right or license under the GDL Patents or GDL Technology,
other than the option right set forth in Section 4.1 hereof. Subject to the
option granted in Section 4.1, nothing contained herein shall be construed as
hindering Cytogen's right to freely practice and license GDL Patents and GDL
Technology. Nothing contained herein shall be construed as hindering Elan's
right to freely practice and license Elan Patents and Elan Technology.
3.5 Other Products. Subject to Sections 3.1, 3.2, 4.1 and 4.5
--------------
hereof, for products that are contained within Program Technology and that are
related to both (i) the Elan Patents or Elan Technology, and (ii) the GDL
Patents or GDL Technology; and for products that (a) are covered by one or more
claims, or are produced, processed, or otherwise manufactured by any method
and/or process covered by one or more claims, of an application or patent within
the GDL Patents or of the Program Patents that
- 14 -
<PAGE>
relate to the GDL Patents or GDL Technology; and also (b) are covered by one or
more claims, or are produced, processed, or otherwise manufactured by any method
and/or process covered by one or more claims, of an application or patent
within the Elan Patents or Program Patents that relate to the Elan Patents or
Elan Technology; the parties agree to mutually negotiate in good faith an
agreement regarding the rights to make, use, sell, offer for sale, and import
such products.
4. Option Agreement.
----------------
4.1 Grant of Option. In partial consideration for the payments under
---------------
Section 2 hereof, Cytogen hereby grants to Elan an exclusive option to acquire
the exclusive royalty-bearing right and license under the Cytogen Program
Patents, the Cytogen Program Technology, the Joint Program Patents, the Program
Technology, and the GDL Patents and GDL Technology, with the right to grant
sublicenses to others, to make, use, sell, offer for sale, and import Products
and Know-How Products that are orally administered drug formulations that are
transported across the intestinal epithelium, solely for use in the Field in the
Territory. This option may be exercised at any time during the Option Period.
4.2 Renewal of Option. The Option Period may be extended by Elan for
-----------------
an additional three (3) month period, upon written notice to Cytogen at any time
prior to thirty (30) days before the expiration of the Option Period. In the
event that the parties are engaged in good faith negotiations prior to the
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<PAGE>
expiration of such renewal period, then, upon a written notice to Cytogen, the
Option Period may further be extended for an additional sixty (60) days.
4.3 Exercise of Option. The option may be exercised by Elan by
------------------
written notice to Cytogen during the Option Period, as may be extended pursuant
to Section 4.2 hereof, and upon receipt of such written notice the parties
hereto shall commence the good faith negotiations of an exclusive license (the
"License Agreement"). The terms of the License Agreement shall include, among
other things, the following basic terms and conditions:
(a) Grant of License to Elan. Cytogen would grant Elan the
------------------------
exclusive royalty-bearing right and license under the Cytogen Program
Patents, the Joint Program Patents, and the GDL Patents and GDL
Technology, the Cytogen Program Technology and the Program Technology,
with the right to grant sublicenses to others, to make, use, sell,
offer for sale, and import Products and Know-How Products that are
orally administered drug formulations that are transported across the
intestinal epithelium, solely for use in the Field in the Territory.
(b) Grant Back to Cytogen. Regarding any Product, the
---------------------
manufacture, use, sale or importation of which (i) is licensed to Elan
as set forth in subparagraph (a) directly hereinabove, and (ii) is not
covered by the Elan Technology or Elan Program
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<PAGE>
Technology or one or more pending claims of an application or Valid
Claims of a patent within the Elan Patents or Elan Program Patents,
Cytogen shall have the right to make written inquiry of Elan as to
whether Elan wishes to terminate its license with respect to such
Product. Sixty (60) days subsequent to receipt of such inquiry, if
Elan has not agreed in writing to continue the license with respect to
such Product and, accordingly, to continue to use its commercially
reasonable efforts and diligence to develop, produce and market such a
Product, Cytogen would have the right upon written notice of the same
to Elan to terminate the license granted with respect to such Product,
and, upon such termination, Elan would grant Cytogen the exclusive,
perpetual royalty-free license under the Program Patents to make, use,
sell, offer for sale, and import such Product.
(c) Exploitation. Elan would agree that, throughout the
------------
Term of the License Agreement, it will use its commercially reasonable
efforts to develop, produce and market Products or Know-How Products
that are orally administered drug formulations that are transported
across the intestinal epithelium for use in the Field in the
Territory.
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<PAGE>
(d) Royalty Payments by Elan to Cytogen.
-----------------------------------
(1) In the event that Elan or its Affiliates shall
directly market and sell the Products or Know-How Products, annual
earned royalty payments shall equal [*] percent ([*]%) of all net
sales of the Products and Know-how Products made by Elan or its
Affiliates. In the event that the Products or Know-How Products are
sold by a joint venture of which Elan is a participant, the parties
shall negotiate in good faith the appropriate royalty structure. In
the event that Elan appoints a licensee to market and sell the
Products and Know-How Products, earned royalties shall equal
[Information omitted and filed separately with the Commission under
Rule 24b-2.
]
(2) The License Agreement shall provide that in the
event that the sum of the Licensing Fees
* Information omitted and filed separately with the Commission under
Rule 24b-2.
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<PAGE>
received by Elan and Manufacturing Fees received by Elan in any given
year are less than an amount equal to [*] percent ([*]%) of all net
sales of the Products and Know-How Products generated by licensees of
Elan in such year, then the parties will negotiate in good faith an
appropriate adjustment to the earned royalty for such year, and, in
the event the parties are unable to reach agreement within one hundred
twenty (120) days of the end of such year, the determination of the
appropriate adjustment to earned royalties shall be submitted to
arbitration pursuant to Section 10.1 hereof.
(e) A right of first negotiation extended to Elan for a
license to make, use, sell, and import Products and Know-How Products
that are drug formulations that (i) are transported across the
pulmonary epithelium through a nebulized formulation for use in the
Field in the Territory; or (ii) are transported across the blood brain
barrier for use in the Field in the Territory; or (iii) are
transported across the dermis for use in the Field in the Territory
(each an "Additional Product") on identical terms as set forth in
Section 4.5 hereof.
(f) Keeping by Elan of books and records relevant to royalty
payments and by Cytogen relevant to
* Information omitted and filed separately with the Commission under
Rule 24b-2.
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<PAGE>
manufacturing costs, if applicable -- standard provisions.
(g) Reports and royalty payments by Elan -standard
provisions.
(h) Confidential Information -- standard provisions.
(i) Third Party Infringement -- standard provisions.
(j) Mutual Indemnifications -- standard provisions.
(k) Obtaining of appropriate insurance by Elan, and where
appropriate, by Cytogen -- standard provisions.
(l) Appropriate warranties and limitations on liabilities --
standard provisions.
(m) Patent marking obligations on Elan -- standard
provisions.
(n) A term of the later of ten (10) years from first
commercial sale, or the date of the last applicable patent to expire, with
appropriate termination provisions.
(o) Depending in part upon whether the Product or Know-How
Product that is an orally administered drug formulation transported across
the intestinal epithelium for use in the Field in the Territory has a
biological or chemical formulation base, either Elan or
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<PAGE>
Cytogen or a mutually acceptable third party will become the exclusive
manufacturer of such Product pursuant to a manufacturing agreement which
will be negotiated and executed on commercially reasonable terms.
(p) Ownership of all regulatory approvals and related
submissions shall reside with Elan -- standard provision.
4.4 Termination of Option. In the event that the parties fail to
---------------------
execute a License Agreement during the Option Period, then, subject to the
rights granted in Section 3.1 hereof, Elan shall own the Elan Program Patents
and Cytogen shall own the Cytogen Program Patents.
4.5 Right of First Offer.
--------------------
(a) During the Term of this Agreement, Cytogen shall
promptly notify Elan in writing of its intention to develop or
commercialize with a third party or on its own behalf any Additional
Product. Such notice shall set forth such data and other information
as in its possession regarding the Additional Product necessary for
Elan to evaluate the offer. Within sixty (60) days of such notice,
Elan shall confirm in writing of its intent to negotiate with Cytogen
for the rights to an Additional Product.
(b) In the event Elan exercises its rights pursuant to this
Section 4.5, the parties shall negotiate in good faith to determine
mutually
- 21 -
<PAGE>
acceptable terms and conditions thereto, which terms (including
financial terms) shall be substantially similar to those contained
herein or in the License Agreement, provided, however, that the
financial terms under any future research and development program
shall be dependent on the nature, scope and risk inherent in each
particular program. In the event that Elan does not elect to enter
into negotiations with Cytogen or if, by the expiration of one hundred
twenty (120) days from Cytogen's initial notice, the parties cannot
decide upon mutually agreeable terms and conditions, Cytogen shall be
free to undertake development or commercialization of an Additional
Product itself, or through or with one or more third parties provided,
however, that the terms of any agreement with a third party shall be
no more favorable to Cytogen than any terms previously offered by Elan
without first reoffering such new terms to Elan in accordance with
this Section.
5. Inventions and Patent Prosecution.
---------------------------------
5.1 Notice of Inventions. Each party shall promptly notify and fully
--------------------
disclose in writing all ideas and developments, whether or nor patentable,
conceived or reduced to practice by either party in connection with the
performance of the Research Program. The parties shall consult with each other
to review such development and determine its patentability.
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<PAGE>
5.2. Filing, Prosecution, and Maintenance of Program Patents.
-------------------------------------------------------
5.2.1 Program Patents Related to the GDL Patents or GDL
-------------------------------------------------
Technology. Throughout the term of this Agreement, Cytogen, at its expense,
- ----------
shall have the right but shall not be obligated to file United States and/or
foreign patent applications covering any patentable invention included within
the Program Patents that (i) is related to the GDL Patents or GDL Technology,
and (ii) is unrelated to the Elan Patents and Elan Technology; to prosecute and
defend such applications against third party oppositions; and upon grant of any
Letters Patent covering such invention, to maintain such Letters Patent in
force. Cytogen shall have the right to control such filing, prosecution,
defense and maintenance; however, Elan shall be provided with copies of all
documents relating to such filing, prosecution, and defense, in sufficient time
to review such documents and comment thereon, if desired by Elan, prior to
filing. If Cytogen elects not to file or prosecute such applications or
maintain such Letters Patent, Cytogen shall so notify Elan, in which event Elan
shall have the right to file or prosecute such applications and to maintain such
Letters Patent entirely at its own expense.
5.2.2 Program Patents Related to the Elan Patents or Elan
---------------------------------------------------
Technology. Throughout the term of this Agreement, Elan, at its own expense,
- ----------
shall have the right, but shall not be obligated, to file United States and/or
foreign
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<PAGE>
patent applications covering any patentable invention included within the
Program Patents that (i) is related to the Elan Patents or Elan Technology, and
(ii) is unrelated to the GDL Patents and GDL Technology; to prosecute and defend
such applications against third party oppositions; and upon grant of any Letters
Patent covering such invention, to maintain such Letters Patent in force. To
the extent permitted by law, such patent applications will be filed initially in
Ireland. Elan shall have the right to control such filing, prosecution, defense
and maintenance; however, Cytogen shall be provided with copies of all documents
relating to such filing, prosecution, and defense in sufficient time to review
such documents and comment thereon, if desired by Cytogen, prior to filing. If
Elan elects not to file or prosecute such applications or maintain such Letters
Patent, Elan shall so notify Cytogen, in which event Cytogen shall have the
right to file or prosecute such applications and to maintain such Letters Patent
entirely at its own expense.
5.2.3 Other Program Patents. The filing, prosecution and
---------------------
defense of applications and maintenance of patents within the Program Patents
that are not covered by Sections 5.2.1 and 5.2.2 above, shall be as follows:
(1) Cytogen Program Patents. For such applications
-----------------------
and patents that are within Cytogen Program Patents, Cytogen shall have the
right, but not obligation, at its expense, to file and prosecute and defend
such patent
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<PAGE>
applications, and maintain such patents. Cytogen shall have the right to
control such filing, prosecution, defense and maintenance; however, Elan
shall be provided with copies of all documents relating to such filing,
prosecution, and defense, in sufficient time to review such documents and
comment thereon, if desired by Elan, prior to filing. If Cytogen elects
not to file or prosecute such applications or maintain such Letters Patent,
Cytogen shall so notify Elan, in which event Elan shall have the right to
file or prosecute such applications and to maintain such Letters Patent
entirely at its own expense. To the extent permitted by law, such patent
applications will be filed initially in Ireland.
(2) Elan Program Patents. For such applications and
--------------------
patents that are within Elan Program Patents, Elan shall have the right,
but not obligation, at its expense, to file and prosecute and defend such
patent applications, and maintain such patents. Elan shall have the right
to control such filing, prosecution, defense and maintenance; however,
Cytogen shall be provided with copies of all documents relating to such
filing, prosecution, and defense in sufficient time to review such
documents and comment thereon, if desired by Cytogen, prior to filing. If
Elan elects not to file or prosecute such applications or maintain such
Letters Patent, Elan shall so notify Cytogen, in which event Cytogen shall
have the right to file or
- 25 -
<PAGE>
prosecute such applications and to maintain such Letters Patent entirely at
its own expense. To the extent permitted by law, such patent applications
will be filed initially in Ireland.
(3) Joint Program Patents. For such applications and
---------------------
patents that are within Joint Program Patents, the parties shall mutually
agree as to the filing, prosecution, defense, and maintenance thereof, for
each such patent and patent application. In the absence of such agreement,
each party shall be free to proceed with such filing, prosecution, defense,
and maintenance. To the extent permitted by law, such patent applications
will be filed initially in Ireland.
5.2.4 GDL Patent and Elan Patents. Nothing contained herein
---------------------------
shall be construed as imposing on Cytogen any obligations to Elan with respect
to the filing, prosecution and defense of applications and maintenance of
patents within the GDL Patents. Nothing contained herein shall be construed as
imposing on Elan any obligations to Cytogen with respect to the filing,
prosecution and defense of applications and maintenance of patents within the
Elan Patents.
6. Ownership. Ownership of Program Patents and Program Technologies
---------
shall be as follows:
(a) Cytogen shall wholly own legal title to (i) all Cytogen
Program Patents, and (ii) all Program Technology conceived or made solely
by one or more Cytogen employees.
- 26 -
<PAGE>
(b) Elan shall wholly own legal title to (i) all Elan Program
Patents, and (ii) all Program Technology conceived or made solely by one or
more Elan employees.
(c) Cytogen and Elan shall jointly own legal title to (i) all
Joint Program Patents, and (ii) all Program Technology conceived or made
jointly by (1) one or more Elan employees; and (2) one or more Cytogen
employees.
7. Representations and Warranties.
------------------------------
7.1 By Cytogen. Cytogen represents and warrants to Elan as follows:
----------
(a) Cytogen has all necessary corporate power to authorize the
execution and consummation of this Agreement.
(b) Cytogen either (i) legally and/or beneficially owns the
patents and patent applications within the GDL Patents; or (ii) has licensed
such patents and patent applications with the right to sublicense, including the
right of Elan to further sublicense.
7.2 By Elan. Elan represents and warrants to Cytogen as follows:
-------
(a) Elan has all necessary corporate power to authorize the
execution and consummation of this Agreement.
(b) Elan either (i) legally and/or beneficially owns the patents
and patent applications within the Elan Patents; or (ii) has licensed such
patents and patent applications with the right to sublicense, including the
right of Elan to further sublicense, including the right of Cytogen to further
sublicense.
- 27 -
<PAGE>
8. Term, Termination and Breach.
----------------------------
8.1 Term. The term of this Agreement shall begin on the date hereof
----
and, unless terminated earlier under this Section 8, will terminate on the later
of (a) fifteen (15) years from the date hereof, or (b) the last-to-expire of all
patents included within the Program Patents and GDL Patents. Termination of the
Research Program or Option Period shall not terminate this Agreement, which
shall continue in full force and effect.
8.2 Material Breach. Either party may terminate this Agreement upon
---------------
a material breach of any of the terms of this Agreement by the other party if
the terminating party has given a breaching party notice of the breach and the
breaching party has failed to remedy such breach within forty-five (45) days of
the notice of the breach. For purposes of this Agreement, failure of either
party to materially comply with the Research Plan, including a failure to
achieve milestones, shall constitute a breach.
8.3 Change of Control. Upon a change of control in either party, the
-----------------
other party may terminate this Agreement by providing thirty (30) days notice of
such termination within sixty (60) days of the change of control event. For
purposes of this Section, change of control shall mean the acquisition of fifty
percent (50%) or more of the issued and outstanding equity securities of the
affected party in either a single transaction, or a series of related
transactions by a non-Affiliate.
- 28 -
<PAGE>
8.4 Insolvency. This Agreement may be terminated by either Cytogen
----------
or Elan (a) in the event that a case or proceeding shall be commenced and
continue undismissed or unstayed for a period of sixty (60) calendar days
against the other (the "Insolvent Party") or such Insolvent Party shall commence
a voluntary case, in either case seeking relief under the bankruptcy laws or any
other law relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, in each case as now or hereafter in effect,
or (b) the Insolvent Party shall apply for, consent to, or fail to contest, the
appointment of a receiver, liquidator, custodian, trustee or the like for such
party or for all or any part of its property, or (c) the Insolvent Party shall
make a general assignment for the benefit of its creditors, or (d) either party
shall fail to, or admit in writing its inability to, pay, or generally not be
paying, its debts as they become due.
8.5 License Agreement. Elan may, at its option, terminate this
-----------------
Agreement upon thirty (30) days written notice if the parties hereto have failed
to execute the License Agreement within one hundred twenty (120) days after
Elan's written exercise of its option pursuant to Section 4.3 hereof (the
"Optional Termination Date") provided, however, in the event that the parties
continue to negotiate in good faith on the Optional Termination Date, the
Optional Termination Date shall be extended for an additional thirty (30) days
to permit the execution of the License Agreement.
- 29 -
<PAGE>
8.6 Rights Upon Termination. In the event this Agreement is
-----------------------
terminated by either party prior to the execution of the License Agreement, then
each of the parties shall promptly return the other's Technology.
9. Confidentiality.
---------------
9.1 Non-Use.
-------
(a) All information provided by one party to the other under
this Agreement shall be regarded as confidential, unless the parties
have agreed otherwise in writing. Cytogen and Elan agree for
themselves and their Affiliates that during the term of this Agreement
and for five years thereafter, each of them shall keep completely
confidential and shall not disclose to any third party or publish or
submit for publication or otherwise divulge or use, any technical
information furnished to it by the other party, except
(i) to consultants, Affiliates, sub-licensees,
manufacturers and agents who are obligated to maintain it in
confidence pursuant to written agreements which are at least as
stringent as the terms of this Section 9;
(ii) as necessary to obtain approval from a governmental
agency in order to market the Product;
- 30 -
<PAGE>
(iii) as reasonably may be required in a patent
application covering the subject matter which is encompassed
within this Agreement; or
(iv) as otherwise may be required by law, regulation or
judicial order.
(b) Should Elan wish to use a third party to have the
Product that is an orally administered drug formulation transported
across the intestinal epithelium for use in the Field manufactured for
Elan, it may do so only if such third party accepts the
confidentiality, nondisclosure, and non-use provisions set forth
herein as binding upon them.
9.2 Confidential Information. Excepted from this secrecy obligation
------------------------
is such information which as can be established by competent proof:
(a) was known, other than under binder of secrecy or non-use to
the receiving party prior to its disclosure to such party;
(b) has become public other than through acts or omissions
attributable to the receiving party; or
(c) was subsequently lawfully obtained from a third party not
acquiring the information under an obligation of confidentiality from the
disclosing party.
10. Miscellaneous Provisions.
------------------------
10.1 [Information omitted and filed separately with the Commission
under Rule 24b-2.
- 31 -
<PAGE>
Information omitted and filed separately
with the Commission under Rule 24b-2.
- 32 -
<PAGE>
]
10.2 Remedies. Each of the parties hereto acknowledges and agrees
--------
that in the event of a breach or threatened breach of this Agreement, the other
party has no adequate remedy at law and accordingly shall be entitled to
injunctive and other equitable remedies in addition to any remedy it might have
at law or in equity.
10.3 Public Communications. Neither party shall make any press
---------------------
release or other similar public disclosure or announcement concerning this
Agreement, without the prior written consent of the non-disclosing party, except
as otherwise required by law. Consent will be deemed granted if no response is
received from the non-disclosing party within five (5) business days of its
confirmed written request for approval from the disclosing party.
Notwithstanding the foregoing, in the event such disclosure or public
announcement is required to be made on
- 33 -
<PAGE>
a more immediate basis in order to comply with applicable state or federal
securities laws, then approval will be deemed granted if no response is received
from the non-disclosing party within the timeframes required by law; provided,
however, that the disclosing party provides the non-disclosing party with notice
of the legally required timeframe for approval of the disclosure at the time of
providing a copy of the proposed disclosure or announcement.
10.4 Approval of Publications. All proposed publications, abstracts
------------------------
or oral presentations disclosing research or results obtained in the performance
of the Research Program must be agreed to by both parties and must be submitted
for review at least sixty (60) days in advance of the expected publication or
presentation date. In the event either party is of the opinion that such
publication, abstract or presentation would constitute the disclosure of subject
matter proprietary to either company or the premature publication of patentable
subject matter, either party shall promptly notify the other in writing, who
should then delay publication or presentation of such article or abstract for a
period of sixty (60) days until either (a) a United States patent application
shall have been filed, or (b) the relevant teaching shall have been sufficiently
deleted from the proposed publication, abstract or presentation in order to
preclude public disclosure of the subject matter.
10.5 Consents Not Unreasonably Withheld or Delayed. Whenever
---------------------------------------------
provision is made in this Agreement for either party to
- 34 -
<PAGE>
secure the consent or approval of the other, such consent or approval shall not
be unreasonably withheld or delayed.
10.6 Entire Agreement: Waivers. This Agreement constitutes the
-------------------------
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter. No waiver of any provision of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar).
10.7 Amendment or Modification. The parties hereto may not amend or
-------------------------
modify this Agreement except in such manner as may be agreed upon by a written
instrument executed by both parties.
10.8 Independent Contractors. The parties agree that with respect to
-----------------------
the business arrangement contemplated herein they shall both be acting as
independent contractors and nothing herein contained or contained in this
Agreement shall constitute the parties as entering upon a joint venture nor
shall constitute either party as the agent for the other for any purposes
whatsoever.
10.9 Survival. Etc. Sections 3.1 (Grant by Cytogen to Elan), 3.2
--------------
(Grant by Elan to Cytogen), 3.3 (No Diligence Obligations), 3.4 (Exclusion), 5.2
(Filing, Prosecution, and Maintenance of Program Patents, 6 (Ownership), 9
(Confidentiality), 10.1 (Arbitration) and 10.14 (Governing Law) of this
Agreement shall survive the expiration or termination of
- 35 -
<PAGE>
this Agreement for any reason and shall continue in full force and effect
forever thereafter.
10.10 Severability. In the event that any provision hereof would,
------------
under applicable law, be invalid or unenforceable in any respect, such provision
shall (to the extent permitted under applicable law) be construed by modifying
or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law. The provisions hereof are
severable, and in the event any provision hereof should be held invalid or
unenforceable in any respect, it shall not invalidate, render unenforceable or
otherwise affect any other provision hereof.
10.11 Assignment; Binding Effect. Neither party shall assign,
--------------------------
transfer or otherwise dispose of this Agreement in whole or in part to any
individual, firm or corporation without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, this Agreement shall be assignable by either party without the
consent of the other to an Affiliate. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
such transferees, successors and assigns shall be deemed to be a party hereto
for all purposes hereof).
10.12 Notices. Any notices or other communications required or
-------
permitted hereunder shall be sufficiently given if in
- 36 -
<PAGE>
writing and delivered personally or sent by telecopier, Federal Express (or
similar courier service), or registered or certified mail, postage prepaid,
addressed as follows:
If to Cytogen, to it at:
Cytogen Corporation
600 College Road East
Princeton, NJ 08540-5308
Attention: President
Fax No. (609) 951-9298
If to Elan, to it at:
Elan Corporation plc
Monksland
Athlone, County Westmeath
Ireland
Fax No. 011-353-902-92427
Attention: President
Unless otherwise specified herein, such notices or other
communications shall be deemed received (a) on the date delivered, if delivered
personally, (b) three business days after being sent by Federal Express or a
similar overnight courier service, if sent by Federal Express or such similar
courier service, (c) one business day after being delivered, if delivered by
telecopier and (d) five business days after being sent, if sent by registered or
certified mail. Each of the parties hereto shall be entitled to specify a
different address by giving notice as aforesaid to the other party hereto.
10.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an
- 37 -
<PAGE>
original, but all of which together shall constitute but one and the same
instrument.
10.14 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New Jersey applicable to
contracts executed in and to be performed in that state, without giving effect
to any choice or conflict of law provision or rule that would cause the
application of the laws of any other jurisdiction.
- 38 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the date first above
written by their respective officers thereunto duly authorized.
CYTOGEN CORPORATION
By: /s/ Thomas J. McKearn
-----------------------------
Title: President and CEO
ELAN CORPORATION plc
By: /s/ Thomas Lynch
----------------------------
Title: Chief Financial Officer and
Executive Vice President
LIST OF SCHEDULES
- -----------------
SCHEDULE A List of United States and Foreign Patent Applications related to
the GDL technology
<PAGE>
Exhibit 10.32
DISTRIBUTION AGREEMENT
----------------------
This Agreement is made as of this 22nd day of December, 1995 by and
between CYTOGEN CORPORATION, a Delaware corporation having its principal place
of business at 600 College Road East, Princeton, New Jersey 08540 ("Cytogen")
and FAULDING (CANADA) INC., a Canadian corporation having its principal place of
business at 334 Aime-Vincent, Vaudreuil, Canada J7V 5V5 ("Faulding").
WHEREAS, Cytogen has developed and commercialized in vivo colorectal
-- ----
and ovarian cancer imaging products which use monoclonal antibodies as part of
radioisotopic detection techniques; and
WHEREAS, Faulding has substantial experience in marketing
biotechnology-based medical products and desires to distribute Cytogen's
colorectal and ovarian cancer imaging products in Canada; and
WHEREAS, Faulding has paid all amounts due and owing under that
certain letter of intent by and between the parties hereto; and
WHEREAS, Cytogen is willing to use Faulding as its exclusive
distributor in Canada.
<PAGE>
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:
ARTICLE I - DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the meanings indicated:
1.1 Effective Date shall mean the date of this Agreement first written
--------------
above, which shall also be the date on which both parties execute this
Agreement.
1.2 FDA shall mean the United States Food and Drug Administration.
---
1.3 First Commercial Sale shall mean the first time sales are made of
---------------------
the Product by Faulding or its sublicensees to an unrelated third party.
1.4 HPB shall mean the Health Protection Branch of the Department of
---
Health, Canada.
1.5 Marketing Applications shall mean health registration applications
----------------------
pending before the HPB that are required as a condition precedent to marketing
the Products within the Territory.
- 2 -
<PAGE>
1.6 Marketing Authorizations shall mean authorization by an appropriate
------------------------
governmental agency required as a condition precedent to the sale of the
Products within the Territory.
1.7 Net Sales Revenue shall mean [Information omitted and filed
-----------------
separately with the Commission under Rule 24b-2.
]
1.8 Products shall mean and collectively include Cytogen's in vivo
-------- -- ----
diagnostic imaging products which utilize its patented or proprietary technology
and are used for the screening, diagnosis and monitoring of human colorectal and
ovarian cancer and are known as OncoScint CR/OV.
1.9 Territory shall mean Canada.
---------
1.10 Trademark shall mean "OncoScint."
---------
- 3 -
<PAGE>
ARTICLE II - APPOINTMENT OF DISTRIBUTOR
2.1 Appointment of Distributor. Subject to the terms and conditions of
--------------------------
this Agreement, Cytogen hereby appoints Faulding as exclusive distributor of the
Products within the Territory. Cytogen reserves the right to grant similar
distribution rights in the Products to third parties for distribution and sale
outside of the Territory provided, however, such third parties shall be
prohibited from selling or distributing the Products within the Territory during
the term of this Agreement.
2.2 Rights to Other Products. In the event that Cytogen subsequently
------------------------
determines to grant marketing and distribution rights in the Territory to its
product using monoclonal antibodies for use with radioisotopes in in vivo
-- ----
imaging for prostate cancer presently known as ProstaScint (the "Other
Product"), Cytogen shall provide Faulding a right of first offer with respect to
such rights in accordance with the following procedure.
2.2.1 Cytogen shall deliver to Faulding a written notice
setting forth the material terms of the offer (the "Offer"), including any
pricing information, definitions of the market and territory, product data and
specifications, and any additional information necessary for Faulding to
evaluate the Offer.
- 4 -
<PAGE>
2.2.2 Notice of Faulding's intention to accept an Offer shall be
evidenced by a writing signed by Faulding and delivered to Cytogen prior to the
end of the sixty (60) day period following the date of receipt of such Offer by
Faulding.
2.2.3 In the event that Faulding does not elect to accept the
Offer, Cytogen may grant the marketing and distribution rights to the Other
Product to a third party on the same terms as set forth in the Offer, or market
and sell the Other Product in the applicable territory with its own direct sales
force; provided, however, the marketing and distribution rights to the Other
-------- -------
Product may not be granted to a third party on terms and conditions materially
more favorable from those set forth in the Offer until the marketing and
distribution rights are again offered to Faulding under the procedures specified
in this Section 2.2.
2.3 Marketing Authorizations.
------------------------
2.3.1 Cytogen's Obligations. Cytogen shall use its best
---------------------
efforts to transfer or otherwise assign to Faulding any and all Marketing
Applications. These Marketing Applications shall identify Faulding as both an
importer and distributor of the Products. Cytogen shall deliver to Faulding, at
Cytogen's expense, all scientific, clinical, toxicologic and manufacturing data
in the possession of Cytogen and necessary to obtain all required Marketing
Authorizations within the Territory, provided,
- 5 -
<PAGE>
however, if such necessary data is not in the possession of Cytogen, the parties
shall meet to determine if and in what manner the data may be obtained.
2.3.2 Faulding's Obligations. At its own expense, Faulding
----------------------
shall use its best efforts to (i) assist in the transfer, assignment or
amendment of the Marketing Applications, and (ii) obtain all necessary Marketing
Authorizations within the Territory in a commercially reasonable time. Faulding
shall provide Cytogen with quarterly progress reports of its efforts to obtain
Marketing Authorizations.
2.4 Trademark License. Cytogen hereby grants to Faulding the non-
-----------------
transferable right and license, with no right to grant sublicenses, to use the
Trademark within the Territory, alone or in conjunction with any one or more
trademarks of Faulding on the Products. Faulding shall use the trademark in
prominent form on Products sold in the Territory pursuant to the license granted
herein. Cytogen represents and warrants that the Trademark has been registered
in the Territory, that Cytogen has the authority to grant the right and license
to the Trademark to Faulding for use in the Territory, and that Cytogen is not
aware of any infringement of the Trademark in the Territory by a third party.
2.5 Provision of Data. Each of the parties agrees to provide the other
-----------------
promptly with all clinical and technical information and data with respect to
the Product which is
- 6 -
<PAGE>
developed during the term of this Agreement and which is necessary to comply
with all regulatory requirements and for the marketing and sale of the Product
in accordance with this Agreement.
ARTICLE III - PAYMENTS
3.1 Milestone Payments. In consideration of the distribution rights
------------------
granted to Faulding herein, Faulding shall make the following payments to
Cytogen in United States dollars at the following times and in accordance with
the occurrence of the following events:
[Information omitted and filed separately with the Commission under
rule 24b-2.
]
3.2 Purchase Price. For each vial of Product delivered to Faulding
--------------
pursuant to Article IV hereof, Faulding shall pay to Cytogen the sum of
[Information omitted and filed separately with the Commission under Rule 24b-
2.], which shall be due and payable within thirty (30) days of receipt of an
invoice from Cytogen.
- 7 -
<PAGE>
3.3 Additional Payments. In addition to the payments due under Section
-------------------
3.2 hereof, commencing on the second anniversary of the First Commercial Sale,
Faulding shall pay to Cytogen an amount equal to [*] percent ([*]%) of Net Sales
Revenue. Payments due under this Section 3.3 shall be made within forty-five
(45) days after the end of each quarter.
3.4 Quarterly Reports. Within forty-five (45) days after the end of
-----------------
each quarter, Faulding shall provide Cytogen with a written statement with
respect to such period specifying the Net Sales Revenue of Products during the
period and the amount of additional payments due, if any, under Section 3.3
hereof.
3.5 Record and Audit Rights.
-----------------------
3.5.1 Faulding shall keep complete and accurate records pertaining
to the sale of Products appropriate to determine additional consideration
payable under Section 3.3 of this Agreement.
3.5.2 At the request and expense of Cytogen, an independent
auditor selected by Cytogen shall have access limited to once per calendar year
at Faulding's principal place of business during ordinary business hours to such
records maintained by Faulding as may be necessary to:
(a) determine, with respect to the preceding year the
correctness of any report or payment made under this
Agreement, or
* Information omitted and filed separately with the Commission
under Rule 24b-2.
- 8 -
<PAGE>
(b) obtain information with respect to the preceding year as to
the additional payments due under Section 3.3 hereof. If
deemed necessary or desirable in the sole opinion of the
accountant, the accountant shall at Cytogen's expense be
permitted to consult with and obtain the assistance of
consultants selected by the accountant and acceptable to
Faulding. Such acceptance shall not be unreasonably
withheld. Neither the accountant nor the selected
consultants shall disclose to Cytogen or any third parties
any information relating to the business of Faulding other
than information relating solely to the accuracy of the
reports and payments under this Agreement and shall execute
a reasonably acceptable confidentiality agreement.
3.6 Method of Payments. All payments due hereunder shall be made in
------------------
United States funds collectible in New York, New York, U.S.A. by wire-transfer.
All payments due Cytogen under this Agreement which are received later than the
due date shall be subject to an additional payment of one percent (1%) per month
or
- 9 -
<PAGE>
portion thereof as liquidated damages for payments received later than the due
date.
3.7 Refund of Milestone Payments. Within ten (10) days of the
----------------------------
occurrence of any of the following events, Cytogen shall pay to Faulding all
monies received by Cytogen pursuant to Section 3.1 hereof.
3.7.1 The NDS for the Product has not been approved by the HPB for
the indications included in the initial filing by December 31, 1996.
3.7.2 Faulding has terminated this Agreement pursuant to Section
10.8 hereof.
3.8 Price Adjustments. [Information omitted and filed separately with
-----------------
the Commission under Rule 24b-2.]
- 10 -
<PAGE>
ARTICLE IV - SUPPLY OF PRODUCTS
4.1 Terms of Faulding Requirements. Subject to the terms and conditions
------------------------------
hereof, Cytogen agrees to sell and Faulding agrees to purchase from Cytogen
Faulding's entire requirements of the Products, solely for use and/or sale in
the Territory. Cytogen shall use its best efforts to manufacture the Products
and supply them to Faulding in quantities sufficient to satisfy Faulding's needs
in accordance with the provisions of this Article IV. All Products supplied by
Cytogen hereunder shall have a minimum of nine (9) months remaining shelf life
determined as of the date of receipt by Faulding.
4.2 Terms of Supply. The following terms relate to supply of Products:
---------------
4.2.1 Purchase Estimates. Faulding shall submit to Cytogen,
------------------
beginning ninety (90) days before the first anticipated order of Products and at
the beginning of each calendar quarter thereafter, a non-binding estimate of the
amount of Products to be required and purchased by Faulding for the next three
months and the next 12-month periods.
4.2.2 Purchase Orders. Within thirty (30) days before the
---------------
beginning of each calendar quarter thereafter, Faulding shall provide Cytogen
with binding written orders for its purchases of Products for that calendar
quarter, specifying
- 11 -
<PAGE>
the required delivery dates for each order. Cytogen shall supply the Products
in accordance with the purchase orders.
4.2.3 Delivery of Products. Cytogen shall deliver the Products to
--------------------
Faulding F.O.B. Cytogen's place of business in New Jersey, U.S.A.
4.2.4 Product Pricing. Faulding shall have sole discretion to
---------------
establish the resale price of the Products to third parties subject only to any
regulatory or governmental limitations.
4.3 Inspection and Dispute Resolution Relating to Satisfaction of
-------------------------------------------------------------
Product Specifications. The following provisions relate to inspection and
- ----------------------
resolution of disputes:
4.3.1 Inspection. Each shipment of Product by Cytogen shall
----------
be accompanied by a certificate of analysis for the production batch. Faulding
shall inspect and analyze each batch of Product delivered by Cytogen in a manner
consistent with its standard sampling procedures and any claims regarding
quantity or quality of same shall be made by Faulding in writing to Cytogen
specifying in reasonable detail the nature and basis for the claim and citing
relevant control numbers or other information to enable specific identification
of Product in question, and shall be given within thirty (30) days of said
delivery or, if later, by the date on which the basis for such claim should
reasonably have been discovered after the exercise of due diligence. All
- 12 -
<PAGE>
claims made by Faulding after its inspection of finished product shall be
handled on a case-by-case basis during which time Cytogen shall have the right
to first inspect any Product involved before being required to take any action
with respect thereto. Cytogen shall make its investigation within thirty (30)
days of receipt of notice of a claim from Faulding.
4.3.2 Resolution of Disputes Relating to Product Specifications.
---------------------------------------------------------
If the parties hereto fail to agree as to whether a delivered quantity of
Product meets its agreed specifications, then the parties shall cooperate to
have the batch in dispute analyzed by a qualified independent testing laboratory
selected by Faulding to which Cytogen does not have reasonable objection. The
following provisions shall apply with respect to the results indicated by such
independent laboratory:
(a) If the batch of Product is determined to have met its
specifications, then Faulding shall bear the costs of the
independent laboratory testing and shall accept the shipment
of such Product.
(b) If the batch of Product is determined not to meet its
specifications, then Cytogen promptly shall replace the
affected quantity of Product, Faulding shall, at Cytogen's
expense, dispose of such quantity in such
- 13 -
<PAGE>
manner as Cytogen shall direct, and Cytogen shall bear the
costs of the independent laboratory testing.
4.4 Packaging. Cytogen shall supply all Products in finished product
---------
form; provided, Faulding shall supply Cytogen with camera-ready art work for all
--------
labels and packaging material. Each shipment shall include, at no cost to
Faulding, additional vials of Product for quality control purposes in quantities
equal to five percent (5%) of the vials ordered but in no case more than 50
vials for each shipment.
4.5 Title. Title to all Products shipped by Cytogen shall pass to
-----
Faulding upon delivery F.O.B. Cytogen's place of business. Risk of loss shall
pass to Faulding upon delivery. Faulding shall be responsible for making
payment of insurance, shipping, duties and similar costs associated with
delivery of the Products.
4.6 Reporting. Each party agrees to report to the other party in
---------
writing any serious adverse reactions or any side effects which occur or other
adverse events with Product as promptly as possible but in no event later, (i)
with respect to the event set forth in Section 4.6.1(a), within 24 hours after
receipt of information of such event ("Reaction Notice"), (ii) with respect to
the event set forth in Section 4.6.1(b) below, within five (5) days of receipt
of a Reaction Notice, and (iii)
- 14 -
<PAGE>
with respect to the events set forth in Section 4.6.1(c)-(e) below, within ten
(10) days of receipt of a Reaction Notice. Any such reactions or side effects
must be reported (in full detail if requested) irrespective of whether there is
a causal connection with the Product being administered or whether the causal
connection is unclear or presumed to be not likely.
4.6.1 For purposes of this reporting covenant, a serious
adverse event is a reaction which meets one or more of the following criteria:
(a) a reaction that is life threatening or fatal;
(b) a reaction that resulted in hospitalization, or if the
patient was already hospitalized, a reaction which prolonged
hospitalization;
(c) a reaction that resulted in severe or permanent disability;
(d) a reaction that involved congenital anomaly or overdose, or
cancer which was not already present at the beginning of
treatment with Product; or
(e) a reaction that is considered to be important, significant
or otherwise medically serious.
4.6.2 Each of the parties hereto shall monitor all relevant
journals and media communications for information on
- 15 -
<PAGE>
factors materially affecting the use or efficacy of the Product and shall
promptly inform the other party of such information. The informing party may
provide in writing its evaluation of such information. Either party shall
promptly inform the other if it has actual knowledge of any measures which are
necessary to eliminate or minimize any risk associated with the use of a
specific production lot of the Product.
ARTICLE V - ADDITIONAL OBLIGATIONS OF FAULDING
5.1 Marketing Obligations. Faulding agrees to use its diligent efforts
---------------------
to promote and distribute the Products, at its own expense, in the Territory as
soon as feasible after the Effective Date of this Agreement and upon receipt of
the applicable Marketing Authorizations and such marketing materials as Cytogen
is required to furnish hereunder using diligent efforts to maximize sales and
market penetration at the earliest date. Subject to Cytogen's obligations under
Article VIII hereof, Faulding shall also be responsible for all quality control,
lot release for Canadian requirements, promotional activities, marketing and
selling efforts, distribution and technical services. All promotional materials
developed by Faulding shall be approved by Cytogen. Cytogen shall promptly
review such materials, and if no written response is provided by Cytogen within
thirty (30) days after receipt of such material,
- 16 -
<PAGE>
then the material will be deemed to have been approved by Cytogen. Costs
associated with participation by either Faulding or Cytogen in international
conferences or symposia which provide important marketing opportunities for both
parties shall be shared on terms to be negotiated for each such event. Cytogen
shall promptly make available for use by Faulding in the Territory all
promotional material developed by Cytogen for the Product, at no expense to
Faulding.
5.2 Marketing Plans. Faulding shall submit to Cytogen a Product launch
---------------
plan for the Products in the Territory as soon as possible and, in any event no
later than ninety (90) days from the Effective Date, and on or before October of
each year thereafter, an annual marketing and sales plan for the Products. Each
of these plans shall include specific marketing sales strategies, tactics and
goals, market research analysis, promotion budgets, and sales projections.
5.3 Compliance with Laws. Faulding shall use its best efforts to market
--------------------
and distribute the Products in the Territory in compliance with local laws and
regulations and good commercial practice and for uses and applications approved
by Cytogen for the Products.
5.4 Minimum Purchase Requirements. Faulding shall pay to Cytogen the
-----------------------------
minimum annual purchase requirements in the amounts set forth in Schedule A
hereto which establish the minimum
- 17 -
<PAGE>
payments due under Section 3.2 hereof (the "Minimum Annual Purchase
Requirements").
5.5 Purchase Forecasts. Faulding shall submit to Cytogen the quarterly
------------------
purchase forecasts for the Product as required pursuant to Section 4.2.1 hereof
and submit purchase orders for the Products pursuant to Section 4.2.2 hereof.
ARTICLE VI - FAILURE TO MEET MINIMUM
ANNUAL PURCHASE REQUIREMENTS
In the event that in any given year, the total payments by Faulding under
Sections 3.2 and 3.3 hereof do not, in the aggregate, equal or exceed the
Minimum Annual Purchase Requirements for such year (which shall be adjusted each
year upon agreement by the parties to reflect any short-falls attributable to
Cytogen's failure, if any, to provide Product on a timely basis as required by
Article III hereof) and Faulding fails to pay such short-fall within sixty (60)
days of the end of such year, then Cytogen may, at its sole discretion, convert
the grant of the distribution rights pursuant to Section 2.1 hereof to a non-
exclusive basis and correspondingly reduce the royalties payable to Cytogen
pursuant to Section 3.3 hereof. Such election shall be made by delivery of
written notice by Cytogen to Faulding and shall take effect on the date set
forth in the notice.
- 18 -
<PAGE>
ARTICLE VII - CONFIDENTIAL INFORMATION
The parties hereto agree that each shall keep completely confidential and
shall not publish or otherwise divulge or use for its own benefit or for the
benefit of any third party any information of a proprietary nature furnished to
it (the "receiving party") by the other party (the "disclosing party") for a
period of five (5) years after the termination of this Agreement without the
prior written approval of the disclosing party in each instance, except to the
extent that it is necessary to divulge such information for the obtaining of
governmental approval for the marketing of the Products. Nothing in this
Article 7 shall prevent disclosure or use of information (i) already known to
the receiving party, (ii) which was known to the public at the time of
disclosure, or subsequently becomes so known through no act or omission of such
party, or (iii) which is properly acquired by the receiving party from a third
party having the right to convey such information. Information of a proprietary
nature shall include, but not be limited to, information concerning a party's
products, proposed products, marketing plans, methods of manufacture, customers
or any other information or materials in whatever form not generally known to
the public.
- 19 -
<PAGE>
ARTICLE VIII - WARRANTY
8.1 Warranties. Cytogen represents and warrants to Faulding that all
----------
Products manufactured and delivered to Faulding pursuant to this Agreement:
(a) shall meet Cytogen's specifications for such Product at the
time of delivery by Cytogen to Faulding and throughout its
stated shelf-life, provided however, that such Product has
been stored in accordance with the instructions on the
labelling of the packaging for such Product;
(b) shall be manufactured and stored by Cytogen in compliance
with all aspects of current applicable federal, state,
provincial and local laws, rules, and regulations in a plant
which meets the requirements of the Regulatory Authority in
filings in the Territory and current Good Manufacturing
Practices as defined by the Regulatory Authority in the
Territory;
(c) shall be free from all adulteration, misbranding, and
defects in materials, composition, and manufacture within
the meaning of the FDA and Cosmetic Act and other
- 20 -
<PAGE>
applicable regulatory requirements in the Territory; and
(d) shall be free and clear of all security interests, liens, or
other encumbrances of any kind or character.
8.2 Infringement. Cytogen represents and warrants to Faulding that to
------------
the best of its knowledge the use and sale of the Product does not infringe any
Canadian patent or violate the trade secret rights or other intellectual
property rights of any third party.
8.3 Ownership. Faulding acknowledges and agrees that Cytogen owns the
---------
technical information with respect to Product, if any, and all industrial and
intellectual property rights of any kind in relation to such technical
information including the right to patents, registered or other designs,
copyright and any other confidential information. Nothing contained in this
Agreement shall be effective to give Faulding any rights of ownership in and to
the Product technical information and to the intellectual property in relation
to the Product technical information and providing the Product technical
information to Faulding under this Agreement is for the sole purpose of
obtaining approval from the Regulatory Authorities in the territory for the
Product.
- 21 -
<PAGE>
8.4 Remedy. With respect to any Product found by Faulding to be
------
unacceptable pursuant to Article 4 hereof, Cytogen shall grant to Faulding a
credit equal to the purchase price paid by Faulding for such Product and
reimburse Faulding for any related insurance, customs, or handling expenses
incurred by Faulding. In no event shall Cytogen be liable under this Agreement
for any failure of any Product to meet the Specifications due to improper use,
storage or shipment by Faulding or anyone receiving the Product from Faulding.
ARTICLE IX - INDEMNIFICATION
9.1 Indemnification by Cytogen. Cytogen agrees to and hereby does
--------------------------
indemnify and hold Faulding harmless from and against all claims, damages,
losses, costs and expenses, including reasonable attorneys' fees, which Faulding
may incur by reason of any Products sold or furnished by Cytogen which result in
injury, illness or death of any person, to the extent that such claims arise out
of or result from either the negligence or willful misconduct of Cytogen in (i)
product design, or (ii) manufacturing, or from a breach of any representations
or warranties by Cytogen hereunder, except if such claims arise from the gross
negligence or willful misconduct of Faulding.
9.2 Indemnification by Faulding. Faulding hereby agrees to and hereby
---------------------------
does indemnify and hold Cytogen harmless from and
- 22 -
<PAGE>
against all claims, damages, losses, costs and expenses, including reasonable
attorneys' fees, which Cytogen may incur to the extent that such claims arise
out or result from (i) the unlawful sale or other distribution of Products by
Faulding, including any improper sales by Faulding to customers who are located
in any territory outside the Territory, (ii) the negligent or willful misconduct
of Faulding in the distribution, labeling or packaging of the Products, (iii)
recommended use of Products by Faulding in violation of this Agreement, or (iv)
breach of any representation or warranty by Faulding hereunder except for such
claims which arise out of or result from the gross negligence, or willful
misconduct of Cytogen.
9.3 Contribution. In the event the negligence of Faulding and Cytogen
------------
contribute to any loss, cost, damages, claim or expense relating to Product
supplied and/or distributed or sold hereunder, then Faulding and Cytogen shall
be responsible for that portion of the loss, cost, damages, claim or expense to
which its negligence contributed.
9.4 Infringement. Cytogen shall indemnify and hold Faulding, its parent
------------
companies, affiliates and subsidiaries, and the officers, directors and
employees of each of them, harmless from any and all liability relating to any
claim of patent infringement based on distribution or sale of Products under
this Agreement.
- 23 -
<PAGE>
9.5 Procedure.
---------
(a) If Faulding or any of its Affiliates or subsidiaries or
Cytogen or any of its Affiliates or subsidiaries (in each
case an "Indemnified Party") receives any written claim
which it believes is the subject of indemnity hereunder by
Cytogen or Faulding, as the case may be, (in each case as
"Indemnifying Party"), the Indemnified Party shall, as soon
as reasonably practicable after forming such belief, give
notice thereof to the Indemnifying Party, including full
particulars of such claim to the extent known to the
Indemnified Party; provided, that the failure to give timely
notice to the Indemnifying Party as contemplated hereby
shall not release the Indemnifying Party from any liability
to the Indemnified Party other than pursuant to this
section, the Indemnifying Party shall have the right, by
prompt notice to the Indemnified Party, to assume the
defense of such claim with counsel reasonably satisfactory
to the Indemnified Party, and at the cost of the
Indemnifying
- 24 -
<PAGE>
Party. If the Indemnifying Party does not so assume the
defense of such claim or, having done so, does not
diligently pursue such defense, the Indemnified Party may
assume such defense, with counsel of its choice, but for the
account of the Indemnifying Party. If the Indemnifying
Party so assumes such defense, the Indemnified Party may
participate therein through counsel of its choice, but the
cost of such counsel shall be for the account of the
Indemnified Party.
(b) The Party not assuming the defense of any such claim shall
render all reasonable assistance to the Party assuming such
defense, and all out-of-pocket costs of such assistance
shall be for the account of the Indemnifying Party.
ARTICLE X - TERM AND TERMINATION
10.1 Term. This Agreement shall commence on the Effective Date and shall
----
continue in force for a fixed term of seven (7) years unless terminated earlier
under the provisions of this Agreement. At the end of the fixed term and each
additional term thereafter, this Agreement shall be automatically renewed on the
- 25 -
<PAGE>
same terms and conditions for an additional two (2) year period unless earlier
terminated under the provisions hereof or unless one party gives to the other
notice of its intention to terminate at least six (6) months prior to the
expiration of the fixed term hereof or of any renewal period.
10.2 Failure to Make Payment. Cytogen may terminate this Agreement at
-----------------------
any time upon Faulding's failure to make payments due to Cytogen pursuant to
this Agreement and the continuation of such failure for more than thirty (30)
days after delivery of written notice to Faulding of such failure.
10.3 Failure to Commercialize. Cytogen may terminate this Agreement at
------------------------
any time upon Faulding's failure to use diligent efforts to move ahead with its
obligations to market, sell and distribute Products under Section 5.1 hereof and
upon the continuation of such failure for more than ninety (90) days after
delivery of written notice to Faulding of such failure, except where such
failure of Faulding is a result of the failure of Cytogen to meet its
obligations as defined in this Agreement or due to circumstances beyond the
reasonable control of Faulding pursuant to Section 11.7 hereof.
10.4 Material Breach. Either party may terminate this Agreement upon
---------------
ninety (90) days prior written notice in the event of the other party's breach
of any other material provision of this Agreement, if such default or breach is
not remedied within
- 26 -
<PAGE>
ninety (90) days from the date of such notice, except where such default or
breach is due to circumstances beyond the reasonable control of the other party
pursuant to Section 11.7 hereof.
10.5 Bankruptcy. If, during the term of this Agreement, either party
----------
makes an assignment, of this Agreement or generally, for the benefit of
creditors, or becomes insolvent or seeks protection under any bankruptcy,
receivership, trust deed, creditor's arrangement or composition, or if any
comparable proceeding is instituted against the other party and is not dismissed
within ninety (90) days of such institution, then the other party may terminate
this Agreement immediately upon delivery of written notice thereof.
10.6 Control Event. In the event that either party (i) sells all or
-------------
substantially all of its assets to a non-affiliate, or (ii) has more than 50% of
its equity securities purchased by a single purchaser who is a non-affiliate in
one transaction (a "Control Event"), then the other party may terminate this
Agreement with thirty (30) days prior written notice at any time within twelve
(12) months after the occurrence of the Control Event.
10.7 No Waiver. Any failure to terminate shall not be construed as a
---------
waiver by the aggrieved party of its right to terminate for future defaults or
breaches.
- 27 -
<PAGE>
10.8 No Marketing Approvals. Faulding may terminate this Agreement by
----------------------
written notice at any time (i) within thirty (30) days after December 31, 1996
if the NDS is not approved by such date, or (ii) within the three (3) month
period following the Effective Date if Faulding receives notice of a claim, or
otherwise has reasonable grounds to believe, that the sale or use of the Product
infringes the intellectual property rights of a third party.
10.9 Effects of Termination.
----------------------
10.9.1 Return of Property. Upon termination of this
------------------
Agreement, each party shall upon the request of the other party return all
books, records, documents and data which it shall have received from the other
party pursuant to this Agreement and which it shall still have in its
possession; provided, however, that a single copy may be retained for legal
-------- -------
archival purposes by each party.
10.9.2 Accrued Payments. Termination of this Agreement by
----------------
either party shall not prejudice the right of either party to recover any
payments due at the time of termination, and shall not prejudice any cause of
action or claim of either party accruing under this Agreement.
10.9.3 Marketing Rights. Upon termination of this Agreement,
----------------
Faulding's rights to market, distribute and sell the Products shall immediately
cease except with respect to the sale
- 28 -
<PAGE>
of Products from existing inventory in the possession of Faulding on the date of
termination. The parties shall undertake to negotiate in good faith a mutually
acceptable agreement to satisfy any contractual obligations of Faulding to
supply the Product to third parties, and Cytogen shall supply all necessary
inventory under such agreements.
10.9.4 Marketing Authorizations. Upon termination of this
------------------------
Agreement, Faulding shall assign or otherwise transfer to Cytogen or its
designees all Marketing Applications and Marketing Authorizations for the
Products provided, however, if such termination does not result from a breach of
this Agreement by Faulding, Cytogen shall reimburse Faulding for its costs
incurred in obtaining such Marketing Authorizations.
10.9.5 Trademark. Upon termination of this Agreement, the
---------
license to use the Trademark shall also terminate and all right, title and
interest in the Trademark shall belong to Cytogen.
ARTICLE XI - GENERAL PROVISIONS
11.1 Governing Law. This Agreement shall be governed by and interpreted
-------------
in accordance with the laws of the State of New Jersey, within the United States
of America, as though all parties were resident of, and the contract was to be
performed in, New Jersey.
- 29 -
<PAGE>
11.2 Jurisdiction. Any dispute arising out of this Agreement shall be
------------
subject only to the jurisdiction of the State of New Jersey and venue for such
litigation shall be proper only in the courts of the State of New Jersey and the
federal courts located in such state. The parties hereto consent to and confer
the personal jurisdiction only upon the courts of the State of New Jersey and
the federal courts located in such state.
11.3 Entire Agreement. Except for that certain confidentiality agreement
----------------
dated June 23, 1995, this Agreement represents the entire Agreement and
understanding of the parties hereto with respect to the marketing and
distribution of the Products, supersedes all previous agreements and
understandings related thereto and may only be amended or modified in writing
signed by an authorized representative of the parties hereto.
11.4 Assignment. Neither party may assign, transfer or otherwise dispose
----------
of any of its rights or obligations pursuant to this Agreement without the prior
written consent of the other party except in connection with the sale or merger
of the entire business. Such consent shall not be unreasonably withheld.
11.5 Notice. All notices under this Agreement shall be in writing and
------
shall be deemed given if sent by telex, telecopier (except for legal process in
each such case), certified or registered mail or commercial courier (return
receipt or confirmation of delivery required), or by personal delivery to
- 30 -
<PAGE>
the party to receive such notices or other communications called for this
Agreement at the following addresses (or at such other address for a party as
shall be specified by such party by like notice):
CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
Attention: President and CEO
FAULDING (CANADA) INC.
334 Aime-Vincent
Vaudreuil, Canada J7V 5V5
Attention: President
11.6 Limitation on Liability. In no event shall either party be liable
-----------------------
to the other for incidental or consequential damages, even if such party shall
have been advised of the possibility of the same.
11.7 Force Majeure. Except for the obligation to make payments under
-------------
this Agreement, each of the parties hereto shall be excused from the performance
of its obligations hereunder in the event such performance is prevented by force
majeure, and such excuse shall continue so long as the condition constituting
such force majeure continues for thirty (30) days after the termination of such
condition. For the purposes of this Agreement, force majeure is defined to
include causes beyond the control of the parties hereto, including without
limitation, acts
- 31 -
<PAGE>
of God, acts, resolutions or laws of any government, war, war-like conditions,
civil commotion, destruction of production facilities or materials by fire,
earthquake or storm, labor disturbances, epidemic and failure of public
utilities or common carriers.
11.8 Publicity. Neither party shall make any press release or other
---------
similar public disclosure or announcement concerning this Agreement, without the
prior written consent of the non-disclosing party, which consent shall not be
unreasonably withheld, except as otherwise required by law. Consent will be
deemed granted if no response is received from the non-disclosing party within
fifteen (15) days of its confirmed written request for approval from the
disclosing party. Notwithstanding the foregoing, in the event such disclosure
or public announcement is required to be made on a more immediate basis in order
to comply with applicable laws, then approval will be deemed granted if no
response is received from the non-disclosing party within the timeframes
required by law; provided, however, that the disclosing party provides the non-
disclosing party with notice of the legally required timeframe for approval of
the disclosure at the time of providing a copy of the proposed disclosure or
announcement.
11.9 Survival of Rights. The provisions of Article 7 (Confidential
------------------
Information), Article 9 (Indemnification), Section
- 32 -
<PAGE>
11.1 (Governing Law), Section 11.2 (Jurisdiction) and Section 11.7 (Limitation
on Liability) shall survive the expiration or termination of this Agreement.
11.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which shall
constitute but one and the same document.
- 33 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CYTOGEN CORPORATION
By: /s/ Thomas J. McKearn
---------------------------
FAULDING (CANADA) INC.
By: /s/ Fabio Lanzieri
---------------------------
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<PAGE>
Distribution Agreement Between
Cytogen Corporation and Faulding Canada Inc.
Dated: December 22, 1995
-----------------
Schedule A - Minimum purchase requirements (In Units)
[Information omitted and filed separately with the Commission under Rule
24b-2.]
- 35 -
<PAGE>
Exhibit 10.33
DISTRIBUTION AGREEMENT
----------------------
This Agreement is made as of this 16th day of January, 1996 by and
between CYTOGEN CORPORATION, a Delaware corporation having its principal place
of business at 600 College Road East, Princeton, New Jersey 08540 ("Cytogen")
and CIS biointernational, a French corporation having its principal place of
business at B.P. 32-91192 Gif-Sur-Yvette, Cedex, France ("CIS").
WHEREAS, Cytogen has developed and commercialized in vivo colorectal
-- ----
and ovarian cancer imaging products which use monoclonal antibodies as part of
radioisotopic detection techniques; and
WHEREAS, CIS has substantial experience in marketing biotechnology-
based medical products and desires to distribute Cytogen's colorectal and
ovarian cancer imaging products in all countries throughout the world other than
the United States and Canada; and
WHEREAS, Cytogen is willing to use CIS as its exclusive distributor in
the identified territories.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein recited, and other good and valuable
<PAGE>
considerations, the receipt of which is acknowledged, it is agreed as follows:
ARTICLE I - DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the meanings indicated:
1.1 CIS shall mean CIS biointernational and those of its subsidiaries
---
engaged in business in the Territory.
1.2 Components shall mean, collectively or individually, the following
----------
three non-labeling elements of the Product: (1) the monoclonal antibody with
linker vial (MAB-B72.3-GYK-DTPA), (2) the sodium acetate vial, and (3) the
filter paper.
1.3 Disruption Event shall mean the occurrence of an extraordinary event
----------------
beyond the reasonable control of CIS which results in the inability of CIS to
sell the Products in its Major Countries for a continuous period of three (3)
months, including, without limitation, recall of the Products by a government
agency, lack of supply of the Products by Cytogen, failure by Cytogen to meet
any of its commitments under Article VIII hereof, failure by Cytogen to enter
into an agreement with Celltech Ltd. in accordance with Article VIII hereof
within ninety (90) days of the Effective Date, failure to provide documentation
in
-2-
<PAGE>
accordance with Section 2.3.1(i) hereof, or a patent infringement action which
results in a court of competent jurisdiction prohibiting the sale of the
Products by CIS.
1.4 Effective Date shall mean the date of this Agreement first written
--------------
above.
1.5 FDA shall mean the United States Food and Drug Administration.
---
1.6 First Commercial Sale shall mean the first time sales are made of
---------------------
Product by CIS to an unrelated third party.
1.7 Marketing Authorizations shall mean authorization by an appropriate
------------------------
governmental agency required as a condition precedent to the sale of the
Products within any country of the Territory.
1.8 Major Countries shall mean the countries identified on Schedule A
---------------
attached hereto.
1.9 Net Sales Revenue shall mean [Information omitted and filed
-----------------
separately with the Commission under Rule 24b-2.
-3-
<PAGE>
]
1.10 Products shall mean and collectively include Cytogen's in vivo
-------- -- ----
diagnostic imaging products, including any future improvements, which contain
the Components and utilize its patented or proprietary technology and are used
for the screening, diagnosis and monitoring of human colorectal and ovarian
cancer, or other human cancers as provided in Section 11.4 hereof, and are known
as OncoScint CR/OV.
1.11 Territory shall mean all countries of the world other than the
---------
United States of American and Canada.
1.12 Trademark shall mean "OncoScint."
---------
ARTICLE II - APPOINTMENT OF DISTRIBUTOR
2.1 Appointment of Distributor. Subject to the terms and conditions of
--------------------------
this Agreement, Cytogen hereby appoints CIS as exclusive distributor of the
Products within the Territory. CIS
-4-
<PAGE>
shall have the right to appoint sub-distributors in those countries in the
Territory in which CIS does not maintain a direct sales effort provided,
however, that CIS deliver to Cytogen prior written notice of the appointment of
any sub-distributor. Cytogen reserves the right to grant similar distribution
rights in the Products to third parties for distribution and sale outside of the
Territory.
2.2 Rights to Other Products. In the event that Cytogen subsequently
------------------------
determines to grant marketing and distribution rights in the Territory to its
product using monoclonal antibodies for use with radioisotopes in in vivo
-- ----
imaging for prostate cancer presently known as ProstaScint (the "Other
Product"), Cytogen shall provide CIS a right of first offer with respect to such
rights in accordance with the following procedure. CIS will also receive
priority consideration if Cytogen decides to use a distributor in the Territory
for any other of its products using radioisotopes.
2.2.1 Cytogen shall deliver to CIS a written notice setting
forth the material terms of the offer (the "Offer"), including any pricing
information, definitions of the market and territory, product data and
specifications, and any additional information necessary for CIS to evaluate the
Offer.
2.2.2 Notice of CIS' intention to accept an Offer shall be
evidenced by a writing signed by CIS and delivered to
-5-
<PAGE>
Cytogen prior to the end of the sixty (60) day period following the date of
receipt of such Offer by CIS.
2.2.3 In the event that CIS does not elect to accept the
Offer, Cytogen may grant the marketing and distribution rights to the Other
Product to a third party on the same terms as set forth in the Offer, or market
and sell the Other Product in the applicable territory with its own direct sales
force provided, however, the marketing and distribution rights to the Other
Product may not be granted to a third party on terms and conditions materially
more favorable (after giving consideration to the relative marketing
qualifications of such third party) from those set forth in the Offer until the
marketing and distribution rights are again offered to CIS under the procedures
specified in this Section 2.2.
2.3 Marketing Authorizations.
------------------------
2.3.1 Cytogen's Obligations. Cytogen shall use its best
---------------------
efforts to transfer or otherwise assign to CIS all Marketing Authorizations
which had been obtained by Chiron b.v. as a licensee of the Products in the
Territory and are more specifically identified on Schedule A attached hereto.
These Marketing Authorizations shall identify CIS as both an importer and
distributor of the Products. Cytogen shall (i) use diligent efforts to cause
Chiron to deliver to CIS within sixty (60) days from the Effective Date a copy
of completed documentation upon
-6-
<PAGE>
which Marketing Authorizations have been granted to Cytogen, Chiron, or any of
its previous sub-distributors such as CSC Pharmaceuticals, (ii) provide, as
requested by CIS, all previously completed scientific, clinical, toxicologic and
manufacturing data necessary to obtain Marketing Authorizations in all other
countries in the Territory, (iii) use best efforts to deliver to CIS, as
requested by CIS, any modified or additional data which Cytogen has available or
subsequently develop to assist CIS to comply with any applicable law, rule or
regulation in the Territory, or to provide CIS' customers with the most current
scientific information about the Product. In the event that the transfer of the
Marketing Authorizations to CIS with respect to the countries identified in
Schedule A hereto are not completed in a commercially reasonable time, then the
parties shall renegotiate the Milestone Payments and Minimum Annual Purchase
Requirements based upon the revised size of the relevant markets.
2.3.2 CIS' Obligations. At its own expense, CIS shall use its
----------------
diligent efforts to (i) assist in the transfer of existing Marketing
Authorizations and (ii) obtain all necessary Marketing Authorizations within
twenty-two (22) of the thirty-six (36) other countries identified in Schedule B,
in a commercially reasonable time and to submit full and complete applications
for Marketing Authorizations in those twenty-two (22) countries
-7-
<PAGE>
hereto within two years of the First Commercial Sale of the Product by CIS in
any Major Country after transfer of Marketing Authorizations in such Major
Country. CIS shall provide Cytogen with quarterly progress reports of its
efforts to obtain Marketing Authorizations.
ARTICLE III - PAYMENTS
3.1 Milestone Payments. In consideration of the distribution rights
------------------
granted to CIS herein, CIS shall make the following payments to Cytogen at the
following times and in accordance with the occurrence of the following events:
[Information omitted and filed separately with the Commission under
Rule 24b-2.
-8-
<PAGE>
]
3.2 Purchase Price. For each set of Components delivered to CIS
--------------
pursuant to Article IV hereof, CIS shall pay to Cytogen the sum of [*], or [*]
for a vial of monoclonal antibody with linker, [*] for a vial of sodium acetate,
and [*] for filter paper, which shall be due and payable within sixty (60) days
of receipt of an invoice from Cytogen, as may be adjusted pursuant to Section
3.6 hereof.
3.3 Additional Payments. In addition to the payments due under Section
-------------------
3.2 hereof, commencing on the second anniversary of the first day of the month
following the First Commercial Sale in any Major Country following transfer of
the Marketing Authorizations, CIS shall pay to Cytogen an amount equal to the
following:
3.3.1 During the third year following the First Commercial
Sale in any Major Country following transfer of the Marketing Authorizations,
[*]% of Net Sales Revenue for such year;
* Information omitted and filed separately with the Commission under Rule 24b-2.
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<PAGE>
3.3.2 During the fourth year following the First Commercial
Sale in any Major Country following transfer of the Marketing Authorizations,
[*]% of Net Sales Revenues for such year;
3.3.3 During the fifth year following the First Commercial
Sale in any Major Country following transfer of the Marketing Authorizations,
and for each year thereafter, [*]% of Net Sales Revenue for such year. Payments
due under this Section 3.3 shall be made within forty-five (45) days after the
end of each year.
3.4 Quarterly Reports. Within forty-five (45) days after the end of
-----------------
each quarter, CIS shall provide Cytogen with a written statement with respect to
such period specifying the Net Sales Revenue of Products during the period in
the amount of additional payments due, if any.
3.5 Record and Audit Rights.
-----------------------
3.5.1 CIS shall keep complete and accurate records pertaining
to the sale of Products appropriate to determine additional consideration
payable under Section 3.3 of this Agreement.
3.5.2 At the request and expense of Cytogen, an independent
auditor selected by Cytogen and acceptable to CIS shall have access limited to
once per calendar year at CIS'
* Information omitted and filed separately with the Commission under Rule 24b-2.
-10-
<PAGE>
principal place of business during ordinary business hours to such records
maintained by CIS as may be necessary to:
(a) determine, with respect to the preceding year the
correctness of any report or payment made under this
Agreement, or
(b) obtain information with respect to the preceding year as to
the additional consideration payable in the case of CIS'
failure to report or pay such payment pursuant to this
Agreement. If deemed necessary or desirable in the sole
opinion of the independent auditor, the independent auditor
shall at Cytogen's expense be permitted to consult with and
obtain the assistance of consultants selected by the
independent auditor and acceptable to CIS. Such acceptance
shall not be unreasonably withheld. Neither the accountant
nor the selected consultants shall disclose to Cytogen or
any third parties any information relating to the business
of CIS other than information relating solely to the
accuracy of the reports and payments under this Agreement.
-11-
<PAGE>
3.6 Method of Payments. All payments due hereunder shall be made in
------------------
United States funds collectible in New York, New York, U.S.A. by wire-transfer.
In the event that Net Sales Revenues are made by CIS in currencies other than
the U.S.Dollar,such Net Sales Revenue shall first (i) be converted to French
Francs at the spot exchange rates between such foreign currency and the French
Franc published in the Wall Street Journal for the last business day of the year
in which such Net Sales Revenues are made, and then (ii) such French Franc
amounts shall be converted to U.S. Dollars at the spot exchange rate between the
French Franc and the U.S. Dollar published in the Wall Street Journal for the
last business day of the year in which such Net Sales Revenue are made (the
"Effective Exchange Rate"). In the event that the Effective Exchange Rate for
any applicable year deviates by more than 10% from the Base Exchange Rate, as
hereinfter defined, in effect for such year, then the Purchase Price during such
year shall be adjusted by multiplying the Purchase Price by one-half of a
fraction, the numerator of which is the difference between the Effective
Exchange Rate and the Base Exchange Rate and the denominator of which is the
Base Exchange Rate [for example, a Base Exchange Rate of FF5 per US $1.0
changing to an Effective Exchange Rate of FF5.6 per US $1.0 will result in a
Purchase Price adjustment of 6% (one-half of FF 0.6 difference = FF 0.3, or 6%
of the FF base rate)]. For purposes of this
-12-
<PAGE>
Section, the Base Exchange Rate shall be equal to the spot exchange rate between
the French Franc and the U.S. Dollar, as published in the Wall Street journal on
(a) during the first two years following the Effective Date, the Effective Date,
and (b) commencing with the third year following the Effective Date, the last
day of the year preceding the year in which the determination of the applicable
Purchase Price is to be made. All payments due to Cytogen under this Agreement
which are received later than the due date shall be subject to an additional
payment of one percent (1%) per month or portion thereof as liquidated damages
for payments received later than the due date.
3.7 Withholding Taxes. If withholding taxes are levied by any taxing
-----------------
authority in the Territory in connection with the receipt by Cytogen of any
royalties or other sums payable under this Agreement, then CIS shall have the
right to pay such taxes to the local tax authority on behalf of Cytogen and make
the payment to Cytogen of the net amount due after deduction of such taxes,
together with (i) evidence of payment of such taxes, (ii) indication of the
amount of such tax paid on Cytogen's behalf, and (iii) indication of the
authority to whom it was paid.
-13-
<PAGE>
ARTICLE IV - SUPPLY OF PRODUCTS
4.1 Terms of CIS Requirements. Subject to the terms and conditions
-------------------------
hereof, Cytogen agrees to sell and CIS agrees to purchase from Cytogen CIS'
entire requirements of the Products, solely for use and/or sale in the
Territory.
4.2 Terms of Supply. The following terms relate to supply of Products:
---------------
4.2.1 Purchase Estimates. CIS shall submit to Cytogen,
------------------
beginning ninety (90) days before the first anticipated order of Products and at
the beginning of each calendar quarter thereafter, a non-binding estimate of the
amount of Products to be required and purchased by CIS for the next three months
and the next 12-month periods.
4.2.2 Purchase Orders. Within thirty (30) days before the
---------------
beginning of each calendar quarter thereafter, CIS shall provide Cytogen with
binding written orders for its purchases of Products for that calendar quarter,
specifying the required delivery dates for each order. Cytogen shall supply the
Products in accordance with the purchase orders.
4.2.3 Costs of Product. CIS shall pay for Components supplied
----------------
by Cytogen at the prices stated in Section 3.2 hereof.
4.2.4 Delivery of Products. Upon compliance with Section
--------------------
4.2.1 hereof by CIS, Cytogen shall deliver the Products
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<PAGE>
to CIS FCA New York area airport within one (1) month after transmission by CIS
of the order by telecopy, and CIS shall be responsible for handling and
transportation charges necessary to transport the Products from Cytogen's place
of business in Princeton, New Jersey to such airport.
4.2.5 Audit of Production Site. With thirty (30) days written
------------------------
notice from CIS, Cytogen shall provide CIS with access to its manufacturing and
quality control facilities during regular business hours to conduct such
inspections as may be required by European Good Manufacturing Practices or other
applicable laws in the Territory.
4.3 Inspection and Dispute Resolution Relating to Satisfaction of
-------------------------------------------------------------
Product Specifications. The following provisions relate to inspection and
- ----------------------
resolution of disputes:
4.3.1 Inspection. Each shipment of Product by Cytogen shall
----------
be accompanied by a certificate of analysis for the production batch. CIS shall
inspect and analyze each batch of Product delivered by Cytogen and any claims
regarding quantity or quality of same shall be made by CIS in writing to Cytogen
specifying in reasonable detail the nature and basis for the claim and citing
relevant control numbers or other information to enable specific identification
of Product in question, and shall be given within thirty (30) days of said
delivery or, if later, by the date on which the basis for such claim reasonably
have
-15-
<PAGE>
been discovered after the exercise of due diligence. All claims made by CIS
after its inspection of finished product shall be handled on a case-by-case
basis during which time Cytogen shall have the right to first inspect any
Product involved before being required to take any action with respect thereto.
4.3.2 Resolution of Disputes Relating to Product
------------------------------------------
Specifications. If the parties hereto fail to agree as to whether a delivered
- --------------
quantity of Product meets its agreed specifications, then the parties shall
cooperate to have the batch in dispute analyzed by a qualified independent
testing laboratory selected by CIS to which Cytogen does not have reasonable
objection. The following provisions shall apply with respect to the results
indicated by such independent laboratory:
(a) If the batch of Product is determined to have met its
specifications, then CIS shall bear the costs of the
independent laboratory testing and shall accept the shipment
of such Product.
(b) If the batch of Product is determined not to meet its
specifications, then Cytogen promptly shall replace the
affected quantity of Product, CIS shall, at Cytogen's
expense, dispose of such quantity in such manner as Cytogen
shall direct, and Cytogen shall bear
-16-
<PAGE>
the costs of the independent laboratory testing.
4.4 Packaging. Cytogen shall supply all Products in bulk unlabeled
---------
vials. Each shipment shall include, at no cost to CIS, additional vials of
Product for quality control purposes and batch release by Dutch Authorities in
quantities equal to ten percent (10%) of the vials ordered but in no case more
than 75 vials for each shipment. Each shipment from a new batch will include
complete batch records with appropriate certificates of analysis for both raw
material and finished product. Cytogen shall also provide filter paper and
sodium acetate buffers. All other packaging and labeling materials shall be the
responsibility of CIS.
4.5 Title. Title to all Products shipped by Cytogen shall pass to CIS
-----
upon delivery FCA New York Airport. Risk of loss shall pass to CIS upon
delivery. CIS shall be responsible for making payment of insurance, shipping,
duties and similar costs associated with delivery of the Products.
4.6 Reporting. Each party agrees to report to the other party in
---------
writing any serious adverse reactions or any side effects which occur or other
adverse events with Product as promptly as possible but in no event later, (i)
with respect to the event set forth in Section 4.6.1(a), within 24 hours after
receipt of information of such event ("Reaction Notice"), (ii)
-17-
<PAGE>
with respect to the event set forth in Section 4.6.1(b) below, within five (5)
days of receipt of a Reaction Notice, and (iii) with respect to the events set
forth in Section 4.6.1(c)-(f) below, within ten (10) days of receipt of a
Reaction Notice. Any such reactions or side effects must be reported (in full
detail if requested) irrespective of whether there is a causal connection with
the Product being administered or whether the causal connection is unclear or
presumed to be not likely.
4.6.1 For purposes of this reporting covenant, a serious
adverse event is a reaction which meets one or more of the following criteria:
(a) a reaction that is life threatening or fatal;
(b) a reaction that resulted in hospitalization, or if the
patient was already hospitalized, a reaction which prolonged
hospitalization;
(c) a reaction that resulted in severe or permanent disability;
(d) a reaction that involved congenital anomaly or overdose, or
cancer which was not already present at the beginning of
treatment with Product; or
(e) a reaction that is considered to be important, significant
or otherwise medically serious.
-18-
<PAGE>
4.6.2 Each of the parties hereto shall monitor all relevant
journals and media communications for information on factors materially
affecting the use or efficacy of the Product and shall promptly inform the other
party of such information. The informing party may provide in writing its
evaluation of such information. Either party shall promptly inform the other if
it has actual knowledge of any measures which are necessary to eliminate or
minimize any risk associated with the use of a specific production lot of the
Product.
ARTICLE V - ADDITIONAL OBLIGATIONS OF CIS
5.1 Marketing Obligations. CIS agrees to use its diligent efforts to
---------------------
promote and distribute the Products, at its own expense, in the Territory as
soon as feasible after the Effective Date of this Agreement and upon receipt of
the applicable Marketing Authorizations using diligent efforts to maximize sales
and market penetration at the earliest date. CIS shall also be responsible for
all quality control, lot release, packaging of components into Product kits,
labeling, promotional activities and technical services. All promotional
materials developed by CIS shall be approved by Cytogen. Costs associated with
participation by either CIS or Cytogen in international conferences and symposia
which provide important marketing
-19-
<PAGE>
opportunities for both parties shall be shared on terms to be negotiated for
each such event.
5.2 Marketing Plans. CIS shall submit to Cytogen a Product launch plan
---------------
for the Products in the Territory as soon as possible and, in any event no later
than ninety (90) days from the Effective Date, and on or before October of each
year thereafter, an annual marketing and sales plan for the Products. Each of
these plans shall include specific marketing sales strategies, tactics and
goals, market research analysis, promotion budgets, and sales projections.
5.3 Compliance with Laws. CIS shall use its best efforts to market and
--------------------
distribute the Products in the Territory in compliance with local laws and
regulations and good commercial practice and for uses and applications approved
by Cytogen for the Products.
5.4 Minimum Purchase Requirements. CIS shall pay to Cytogen the minimum
-----------------------------
annual purchase requirements in the amounts set forth in Schedule C hereto (the
"Minimum Annual Purchase Requirements").
5.5 Purchase Forecasts. CIS shall submit to Cytogen the quarterly
------------------
purchase forecasts for the Product as required pursuant to Section 4.2.1 hereof
and submit purchase orders for the Products pursuant to Section 4.2.2 hereof.
-20-
<PAGE>
ARTICLE VI - FAILURE TO MEET MINIMUM ANNUAL PURCHASE REQUIREMENTS
In the event that in any given year, the total payments by CIS under
Section 3.2 hereof does not equal or exceed the Minimum Annual Purchase
Requirements for such year (which shall be adjusted each year upon agreement by
the parties to reflect any short-falls attributable to Cytogen's failure, if
any, to provide Product on a timely basis as required by Section 4.2.4, or
delays in transferring the Market Authorizations, or Force Majeure affecting
CIS, and CIS fails to pay such short-fall within sixty (60) days of the end of
such year, then Cytogen may, at its sole discretion and as its sole remedy,
convert the grant of the distribution rights pursuant to Section 2.1 hereof to a
non-exclusive basis. Such election shall be made by delivery of written notice
by Cytogen to CIS and shall take effect on the date set forth in the notice.
ARTICLE VII - CONFIDENTIAL INFORMATION
The parties hereto agree that each shall keep completely confidential and
shall not publish or otherwise divulge or use for its own benefit or for the
benefit of any third party any information of a proprietary nature furnished to
it (the "receiving party") by the other party (the "disclosing party") for a
period of five (5) years upon the termination of this Agreement without the
prior written approval of the disclosing
-21-
<PAGE>
party in each instance, except to the extent that it is necessary to divulge
such information for the obtaining of governmental approval for the marketing of
the Products. Nothing in this Article 7 shall prevent disclosure or use of
information (i) already known to the receiving party, (ii) which was known to
the public at the time of disclosure, or subsequently becomes so known through
no act or omission of such party, or (iii) which is properly acquired by the
receiving party from a third party having the right to convey such information.
Information of a proprietary nature shall include, but not be limited to,
information concerning a party's products, proposed products, marketing plans,
methods of manufacture, customers or any other information or materials in
whatever form not generally known to the public.
ARTICLE VIII - WARRANTY
All Products supplied by Cytogen to CIS in accordance with the provisions
of this Agreement shall be manufactured at facilities registered with the FDA,
to the extent required by law, and applicable European regulatory agencies for
such manufacture and in accordance with applicable governmental requirements
including, without limitation, current European Good Manufacturing Practices,
and all applicable laws, rules and regulations of each governmental agency
having jurisdiction over
-22-
<PAGE>
the manufacture and sale of the Products in accordance with the provision of
this Agreement. All Products shall meet the specifications established and set
forth within the product license applications for such Products approved by the
applicable governmental agencies, and shall be of at least the same level of
quality and purity as required by all applicable laws, rules, and/or
regulations, provided that CIS and Cytogen collaborate to meet new or revised
standards. Cytogen shall use diligent efforts to cause Celltech Ltd. to
conclude an agreement under which (i) Celltech commits itself to let CIS consult
and collect, when and as required by any government agency, any information
concerning the batch records of the monoclonal antibody, MAB B.72.3, produced by
Celltech, and (ii) CIS agrees to keep this information confidential.
ARTICLE IX - INDEMNIFICATION
9.1 Indemnification by Cytogen. Cytogen agrees to and hereby does
--------------------------
indemnify and hold CIS harmless from and against all claims, damages, losses,
costs and expenses, including reasonable attorneys' fees, which CIS may incur by
reason of any Products sold or furnished by Cytogen which result in injury,
illness or death of any person, to the extent that such claims arise out of or
result from (i) product design, (ii) manufacturing, or (iii) a breach of the
warranty set forth in Article 8 hereof, except if
-23-
<PAGE>
such claims arise from the gross negligence or willful misconduct of CIS.
9.2 Indemnification by CIS. CIS hereby agrees to and hereby does
----------------------
indemnify and hold Cytogen harmless from and against all claims, damages,
losses, costs and expenses, including attorneys' fees, which Cytogen may incur
to the extent that such claims arise out or result from (i) the unlawful sale or
other distribution of Products by CIS or use by any purchasers, including any
improper sales by CIS to customers who are located in any territory outside the
Territory, (ii) the distribution, labeling or packaging of the Products, or
(iii) recommended use of Products by CIS in violation of this Agreement, except
for such claims which arise out of or result from the gross negligence, or
willful misconduct of Cytogen.
9.3 Infringement. Cytogen shall, at its own expense, defend or at its
------------
option settle any action brought against CIS or its customers which consists of
a claim that the use or the sale of the Products in the Territory infringes any
intellectual property right belonging to a third party and Cytogen shall hold
CIS harmless and indemnify CIS against all damages, losses, or liabilities
resulting from such claims. Cytogen shall be released from its obligations
under this clause unless CIS promptly notifies Cytogen of claim and gives
Cytogen express authority to proceed as contemplated by this clause (and
procures
-24-
<PAGE>
such authority from its customers where necessary) and provides Cytogen with all
available information and assistance as Cytogen may reasonable require. Cytogen
is not aware of any patents or other proprietary rights of third parties which
would be infringed upon by the import or sale of Products in the Territory.
ARTICLE X - TERM AND TERMINATION
10.1 Term. This Agreement shall commence on the Effective Date and shall
----
continue in force for a fixed term of seven (7) years commencing with the First
Commercial Sale by CIS in any Major Country after the transfer of Marketing
Authorizations in that country, unless terminated earlier under the provisions
of this Agreement. At the end of the fixed term and each additional term
thereafter, this Agreement shall be automatically renewed on the same terms and
conditions for an additional one (1) year period unless earlier terminated under
the provisions hereof or unless one party gives to the other notice of its
intention to terminate at least one year prior to the expiration of the fixed
term hereof or of any renewal period.
10.2 Failure to Make Payment. Cytogen may terminate this Agreement at
-----------------------
any time upon CIS' failure to make payments due to Cytogen pursuant to this
Agreement and the continuation of such
-25-
<PAGE>
failure for more than thirty (30) days after delivery of written notice to CIS
of such failure.
10.3 Failure to Commercialize. Cytogen may terminate this Agreement at
------------------------
any time upon CIS' failure to use diligent efforts to move ahead with its
obligations to market, sell and distribute Products under Section 5.1 hereof in
the Major Countries and the other twenty-two countries referred to in Section
2.3.2 hereof and upon the continuation of such failure for more than ninety (90)
days after delivery of written notice to CIS of such failure, except where such
failure of CIS is a result of the failure of Cytogen to meet its obligations as
defined in this Agreement or due to circumstances beyond the reasonable control
of CIS pursuant to Section 11.8 hereof.
10.4 Material Breach. Either party may terminate this Agreement upon
---------------
ninety (90) days prior written notice in the event of the other party's breach
of any other material provision of this Agreement, if such default or breach is
not remedied within ninety (90) days from the date of such notice, except where
such default or breach is due to circumstances beyond the reasonable control of
the other party pursuant to Section 11.8 hereof. It is acknowledged by the
parties hereto that failure to meet Minimum Annual Purchase Requirements shall
not constitute a breach hereunder.
-26-
<PAGE>
10.5 Bankruptcy. If, during the term of this Agreement, either party
----------
makes an assignment, of this Agreement or generally, for the benefit of
creditors, or becomes insolvent or seeks protection under any bankruptcy,
receivership, trust deed, creditor's arrangement or composition, or if any
comparable proceeding is instituted against the other party and is not dismissed
within ninety (90) days of such institution, then the other party may terminate
this Agreement immediately upon delivery of written notice thereof.
10.6 Control Event. In the event that either party (i) sells all or
-------------
substantially all of its assets, or (ii) has more than 50% of its equity
securities purchased by a single purchaser in one transaction (a "Control
Event"), then the other party may terminate this Agreement with thirty (30) days
prior written notice at any time within twelve (12) months after the occurrence
of the Control Event.
10.7 No Waiver. Any failure to terminate shall not be construed as a
---------
waiver by the aggrieved party of its right to terminate for future defaults or
breaches.
10.8 Effects of Termination.
----------------------
10.8.1 Return of Property. Upon termination of this
------------------
Agreement, each party shall upon the request of the other party return all
books, records, documents and data which it shall have received from the other
party pursuant to this Agreement;
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<PAGE>
provided, however, that a single copy may be retained for legal archival
purposes by each party.
10.8.2 Accrued Payments. Termination of this Agreement by
----------------
either party shall not prejudice the right of Cytogen to recover any payments
due at the time of termination, and shall not prejudice any cause of action or
claim of either party accruing under this Agreement.
10.8.3 Marketing Rights. Upon termination of this Agreement,
----------------
CIS' rights to market, distribute and sell the Products shall immediately cease
except with respect to the sale of Products from inventory but in no event for
more than sixty (60) days following termination.
10.8.4 Marketing Authorizations. Upon termination of this
------------------------
Agreement for any reason including the occurrence of a Control Event, CIS shall
assign or otherwise transfer to Cytogen or its designees all Marketing
Authorizations for the Products in consideration for the reimbursement of all
costs incurred by CIS in conducting those studies and tests which were necessary
to obtain the Marketing Authorizations, provided, that CIS furnished prior
notice of such studies and an opportunity to comment.
10.8.5 Upon termination of this Agreement, the license to use
the Trademark shall also terminate and all right, title and interest in the
Trademark shall belong to Cytogen.
-28-
<PAGE>
ARTICLE XI - GENERAL PROVISIONS
11.1 Governing Law. This Agreement shall be governed by and interpreted
-------------
in accordance with the laws of the State of New Jersey, within the United States
of America, as though all parties were resident of, and the contract was to be
performed in, New Jersey.
11.2 Jurisdiction. Any dispute arising out of this Agreement with
------------
respect to the failure of CIS to make payments under this Agreement shall be
subject only to the jurisdiction of the State of New Jersey and venue for such
litigation shall be proper only in the courts of the State of New Jersey and the
federal courts located in such state. The parties hereto consent to and confer
the personal jurisdiction only upon the courts of the State of New Jersey and
the federal courts located in such state. Disputes arising in connection with
any other obligation or duty of the parties under this Agreement shall be
subject to the jurisdiction and venue of Great Britain.
11.3 New Indications. If either party before or after studies conducted
---------------
at its own expense believes that the Product may have a medically and
commercially important new indication, it will provide the other party with
evidence of such an improvement and the parties will enter into good faith
negotiations as a means to expedite obtaining both U.S. and international Market
Authorizations for such indication. Each
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<PAGE>
party reserves the right not to commercialize in its territory if, despite good
faith negotiations, it determines that it is in its best interests not to pursue
such improvement.
11.4 Entire Agreement. This Agreement represents the entire Agreement
----------------
and understanding of the parties hereto with respect to the marketing and
distribution of the Products, supersedes all previous agreements and
understandings related thereto and may only be amended or modified in writing
signed by an authorized representative of the parties hereto.
11.5 Assignment. Neither party may assign, transfer or otherwise dispose
----------
of any of its rights or obligations pursuant to this Agreement without the prior
written consent of the other party except in connection with the sale or merger
of the entire business. Such consent shall not be unreasonably withheld.
11.6 Notice. All notices under this Agreement shall be in writing and
------
shall be deemed given if sent by telex, telecopier (except for legal process in
each such case), certified or registered mail or commercial courier (return
receipt or confirmation of delivery required), or by personal delivery to the
party to receive such notices or other communications called for this Agreement
at the following addresses (or at such other address for a party as shall be
specified by such party by like notice):
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<PAGE>
CYTOGEN CORPORATION
600 College Road East
Princeton, New Jersey 08540
Attention: President and CEO
CIS BIO INTERNATIONAL
B.P. 32-91192 Gif-Sur-Yvette
Cedex, France
Attention: Director of Marketing
11.7 Limitation on Liability. In no event shall either party be liable
-----------------------
to the other for incidental or consequential damages, including, without
limitation, loss of profits, punitive damages and damages arising from a breach
by CIS of its contractual obligations with its customers, even if such party
shall have been advised of the possibility of the same.
11.8 Force Majeure. Except for the obligation to make payments under
-------------
this Agreement, each of the parties hereto shall be excused from the performance
of its obligations hereunder in the event such performance is prevented by force
majeure, and such excuse shall continue so long as the condition constituting
such force majeure continues for thirty (30) days after the termination of such
condition. For the purposes of this Agreement, force majeure is defined to
include causes beyond the control of the parties hereto, including without
limitation, acts of God, acts, resolutions or laws of any government, war, war
like conditions, civil commotion, destruction of production
-31-
<PAGE>
facilities or materials by fire, earthquake or storm, labor disturbances,
epidemic and failure of public utilities or common carriers.
11.9 Publicity. Neither party shall make any press release or other
---------
similar public disclosure or announcement concerning this Agreement, without the
prior written consent of the non-disclosing party, except as otherwise required
by law. Consent will be deemed granted if no response is received from the non-
disclosing party within fifteen (15) days of its confirmed written request for
approval from the disclosing party. Notwithstanding the foregoing, in the event
such disclosure or public announcement is required to be made on a more
immediate basis in order to comply with applicable state or federal securities
laws, then approval will be deemed granted if no response is received from the
non-disclosing party within the timeframes required by law; provided, however,
that the disclosing party provides the non-disclosing party with notice of the
legally required timeframe for approval of the disclosure at the time of
providing a copy of the proposed disclosure or announcement.
11.10 Survival of Rights. The provisions of Article 7 (Confidential
------------------
Information), Article 9 (Indemnification), Section 11.1 (Governing Law), Section
11.2 (Jurisdiction) and
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<PAGE>
Section 11.7 (Limitation on Liability) shall survive the expiration or
termination of this Agreement.
11.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which shall
constitute but one and the same document.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
CYTOGEN CORPORATION
By: /s/ Thomas J. McKearn
----------------------------
CIS biointernational
By: /s/ Jean-Pierre Cabocel
----------------------------
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<PAGE>
SCHEDULE A
Countries with existing OncoScint CR/OV
Marketing Authorizations to be transferred to CIS
Major Countries
---------------
France
Germany
Italy
Spain
United Kingdom
Non-Major Countries
-------------------
Belgium
Denmark
Hungary
Ireland
Luxembourg
Poland
Poland
Slovakia
The Czech Republic
The Netherlands
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<PAGE>
SCHEDULE B
CANDIDATE COUNTRIES FOR NEW MARKETING AUTHORIZATIONS (MAs)
(CIS to obtain MAs in at least 22 of these countires)
Europe South America Africa-Middle Orient Asia-Pacific
Austria Argentina Algeria Australia
Finland Brazil Egypt China
Greece Chile Israel Hong Kong
Norway Colombia Kuwait Indonesia
Portugal Cuba Lebanon Japan
Sweden Mexico Morocco New Zealand
Switzerland Venezuela Saudi Arabia The Philippines
South Africa Singapore
Tunisia South Korea
Turkey Taiwan
United Arab Emirates Thailand
-36-
<PAGE>
SCHEDULE C
Minimum Annual Purchase Requirements
[Information omitted and filed separately with the Commission under Rule 24b-2.]
-37-
<PAGE>
Exhibit 10.34
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT effective as of January 1, 1994 (this
"Agreement") between CYTOGEN CORPORATION, a Delaware corporation (the
"Company"), and THOMAS J. McKEARN, M.D., Ph.D. (the "Employee").
Background
----------
The Employee is currently employed by the Company as President and
Chief Executive Officer. The Board of Directors (the "Board") of the Company
has determined that it is in the best interests of the Company and its
shareholders for the Company to make the following severance arrangements with
the Employee. These arrangements provide for compensation to be paid to the
Employee in the event his employment with the Company is terminated under the
circumstances described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Severance. In consideration of the Employee's continued
---------
employment by the Company, the Company agrees to provide the Employee with the
following severance benefits. In the event the Employee's employment is
terminated by the Company for any reason other than for Cause (defined below),
then, and only in that circumstance, the Employee (or his beneficiaries in the
event of his death before the payment in full of the severance amounts) shall be
entitled to receive an amount equal to one (1) year's salary (at the rate in
effect for the Employee immediately prior to the effective date of such
termination without Cause), which shall be payable, at the sole discretion of
the Company, in monthly installments as the salary would have been paid, or in a
lump sum.
2. Definitions. As used herein, "Cause" shall mean the Employee's
-----------
(i) material refusal or failure to perform and discharge his duties and
responsibilities to the Company in accordance with the terms of his employment,
or willful action or inaction that is materially inconsistent with the terms of
his employment, (ii) material breach of his fiduciary duties as an officer or
member of the Board of Directors of the Company or any subsidiary or affiliate
of the Company, (iii) conviction of a felony, or (iv) conviction of any other
crime involving the personal dishonesty or moral turpitude.
3. Designation of Beneficiary. The Employee, upon executing this
--------------------------
Agreement, shall execute and file with the Company a designation of the
beneficiary (and a designation of one or
<PAGE>
more successor beneficiaries in the event of the death of a beneficiary) to whom
he desires any amount that might be payable in the event of his death before
payment in full of the severance amounts to be paid and distributed. The
Employee shall have the right to change such designation or designations from
time to time by executing and filing a subsequent designation with the Company.
Any subsequent designation delivered to the Company shall be deemed to revoke
all prior designations. If the Employee shall have made no such written
designation or the last designation should be invalid or such beneficiary or
successor beneficiary, if a natural person shall not be in existence, the
Company shall pay and distribute any amount payable by reason of death to the
then person and persons in the first of the following classes (equally among
members of any class) or successive preference beneficiaries living: (i) widow,
(ii) children and (iii) executors and administrators. The Company may make such
payment or distributions directly to the guardian of the beneficiary's person,
or to the person with whom the beneficiary may reside or to any other person
deemed suitable by the Company, in all of the foregoing cases without requiring
any bond or surety of any such payee; and the Company shall not be bound to see
to the application or use of any payments so made.
4. Notices. All notices, advices and communications to be given or
-------
otherwise made to any party to this Agreement shall be deemed to be sufficient
if contained in a written instrument delivered in person, sent by air courier or
sent by first-class, registered or certified mail, postage prepaid, addressed to
such party at the address set forth below:
If to the Employee, to:
Thomas J. McKearn
6040 Lower Mountain Road
New Hope, PA 18938
If to the Company, to:
Cytogen Corporation
600 College Road East
Princeton, NJ 08540
Attention: William C. Mills III, Chairman
-2-
<PAGE>
with a copy to:
Dechert Price & Rhoads
Princeton Pike Corporate Center
997 Lenox Drive
Building Three, Suite 210
Lawrenceville, NJ 08648
Attention: James J. Marino, Esquire
provided, however, that either party to this Agreement may change the address to
- -------- -------
which notices are to be delivered or mailed to such party by giving notice
thereof to the other party. If mailed as aforesaid, any such communication
shall be deemed to have been given on the third business day following that on
which the piece of mail containing such communication is posted.
5. Binding Agreement; Benefit. The provisions of this Agreement
--------------------------
shall be binding upon, and shall inure to the benefit of, the respective heirs,
executors, administrators or other legal representatives, successors and assigns
of each of the parties hereto.
6. Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of New Jersey.
7. Waiver of Breach. The waiver by either party of a breach of any
----------------
provision of this Agreement by the other party must be in writing and shall not
operate or be construed as a waiver of any other breach by such party receiving
the waiver.
8. Entire Agreement; Amendments. This Agreement may be amended only
----------------------------
by an agreement in writing signed by each of the parties hereto.
9. Assignment. This Agreement is personal in its nature and the
----------
parties hereto shall not, without the consent of the other, assign or transfer
this Agreement or any right or obligations hereunder; provided, however, that
-------- -------
the provisions hereof shall inure to the benefit of, and be binding upon each
successor of the Company, whether by merger, consolidation, transfer of all or
substantially all assets, or otherwise.
10. Headings. The section headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
CYTOGEN CORPORATION
By:/s/ William C. Mills III
-------------------------
William C. Mills III
/s/ Thomas J. McKearn
----------------------------
Thomas J. McKearn
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<PAGE>
Exhibit 10.35
DESCRIPTION OF SEVERANCE AGREEMENT
WITH RICHARD J. WALSH
Under the terms of his offer of employment, Mr. Richard Walsh, Vice President of
Corporate Development, will be entitled to receive as severance pay six months
of salary (increased by an additional month for each year of service, up to a
maximum of twelve months) if his employment with CYTOGEN is terminated without
cause.
<PAGE>
Exhibit 10.36
HOROSZIEWICZ-CYTOGEN
AGREEMENT
This Agreement, effective the 20th day of April 1989, between Julius S.
Horosziewicz, M.D., DMSc., whose address is Millard Fillmore Hospital,
Department of Urology, 3 Gates Circle, Buffalo, New York, 14209, (hereinafter
"HOROSZIEWICZ") and Cytogen Corporation, with offices at 600 College Road East,
Princeton, New Jersey, 08540, (hereinafter "CYTOGEN").
ARTICLE I
BACKGROUND
1.01 Research conducted by HOROSZIEWICZ has resulted in the discovery of a
certain murine monoclonal antibody which detects an antigen associated with
human prostatic epithelium and reacts with serum of prostatic cancer patients,
and the hybridoma for producing this antibody.
1.02 HOROSZIEWICZ has filed a patent application in the United States Patent
and Trademark Office describing and claiming said murine monoclonal antibody and
the hybridoma which produces it.
1.03 HOROSZIEWICZ desires to assign said patent application in order to
expedite the commercialization of the murine antibody and its use in therapeutic
and diagnostic products.
<PAGE>
1.04 Since January, 1987 scientists at CYTOGEN have been collaborating with
HOROSZIEWICZ in evaluating the monoclonal antibody and have determined that it
has potential commercial value.
1.05 CYTOGEN wishes to take an assignment of said patent application and to
plan the commercialization of the monoclonal antibody and HOROSZIEWICZ is
willing to assign the patent application to CYTOGEN for that purpose.
ARTICLE II
DEFINITIONS
2.01 "Affiliate" shall mean any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common control
with CYTOGEN. Control shall mean (a) in the case of corporate entities, direct
or indirect ownership of at least forty percent (40%) 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
forty percent (40%) of the equity interest with the power to direct the
management and policies of such non-corporate entity.
2.02 "Agreement" shall mean this Agreement.
- 2 -
<PAGE>
2.03 "Antibody" shall mean that murine monoclonal antibody to prostatic
carcinoma cells designated as 7Ell-C5 antibody which is produced from the
corresponding Hybridoma, including its conjugates, derivatives, fragments and
covalently and genetically modified structures, including reclones.
2.04 "Assigned Application" shall mean United States Patent Application
Serial Number 07/202,869 entitled "Monoclonal Antibodies to a New Antigenic
Marker in Epithelial Prostatic Cells and Serum of Prostatic Cancer Patients"
filed in the United States Patent and Trademark Office on June 3, 1988 by
HOROSZIEWICZ.
2.05 "Effective Date" shall be the date first written above.
2.06 "Field of Use" shall mean any and all in vitro and in vivo uses of
-- ----- -- ----
Product in the diagnosis, prophylaxis and treatment of disease.
2.07 "Hybridoma" shall mean the cell line which is capable of producing the
Antibody, and genetically modified derivatives of the cell line, including
reclones.
2.08 "Improvements" shall mean any advances in or modifications to Product
and Hybridoma which HOROSZIEWICZ develops or acquires during the term of this
Agreement including, but not limited to, all scientific data developed by
HOROSZIEWICZ during
- 3 -
<PAGE>
his conduct of research sponsored by CYTOGEN as provided in sub-paragraph (iv),
paragraph 5.01, Article V hereinbelow.
2.09 "Know-How" shall mean all data, information, technology or special
ability on the part of HOROSZIEWICZ relating to the research, development,
manufacture, testing or use of Hybridoma or Antibody, which are reasonably
related to Product for use in the Field of Use and which are useful in seeking
approval from appropriate governmental health authorities to market Product for
the diagnosis, prophylaxis and treatment of diseases including all animal,
laboratory and human clinical data, technical information, knowledge,
inventions, techniques, processes, systems, formulae, results of
experimentation, designs, statistics and records pertaining to Hybridoma and
Antibody; characterization of Antibody; and all methods of making and using
Hybridoma and Antibody in the detection, evaluation, prevention and treatment of
any disease or condition, whether conducted for experimental or clinical
purposes, owned or controlled by HOROSZIEWICZ.
2.10 "Net Sales" shall mean [Information omitted and filed separately with
he Commission under Rule 24b-2.
- 4 -
<PAGE>
]
2.11 "Patent Assets" shall mean the Assigned Application, any division,
continuation or continuation-in-part of the Assigned Application and any patent
which shall issue based on the Assigned Application, division, continuation or
continuation-in-part; any
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<PAGE>
patent which is a reissue or extension of, or a patent of addition to, any
patent issuing from Assigned Application, or any division, continuation or
continuation-in-part of Assigned Application; any patent application or patent
identified hereinbefore which is hereafter filed or issued in any country of the
Territory; and any patent application which is related to or based on any of
HOROSZIEWICZ's Know-How developed during the performance of this
Agreement,including, but not limited to, the performance of research by
HOROSZIEWICZ which shall be sponsored by CYTOGEN as provided in sub-paragraph
(iv), paragraph 5.01, Article V, hereinbelow, and any division, continuation and
continuation-in-part of said patent application; and any patent which is a
reissue or extension of, or a patent of addition to, any such patent.
2.12 "Payment Product" shall mean and include any Product for use in the
Field of Use (i) which is within the scope of a Valid Claim of a Patent Asset;
or (ii) whose use is within the scope of a Valid Claim of a Patent Asset; or
(iii) which is manufactured or packaged within the scope of a Valid Claim of a
Patent Asset.
2.13 "Product" shall mean any one or more of the following: (a) ascites or
culture supernatant fluid which contains Antibody, (b) purified Antibody, (c)
chemically, biochemically and genetically modified Antibody, and (d) a
composition which incorporates (i) Antibody or (ii) chemically, biochemically,
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<PAGE>
genetically, including covalently, modified Antibody in physical admixture with
inert or active ingredients.
2.14 "Valid Claim" shall mean and include a claim in an issued patent of a
Patent Asset 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.
2.15 "Territory" shall mean the entire world.
ARTICLE III
ASSIGNMENT, WARRANTY AND INDEMNIFICATION
3.01 Attached hereto and made part of this Agreement is an Assignment of
Assigned Application dated April 20, 1989, by HOROSZIEWICZ conveying all right,
title and interest in and to said Assigned Application and to all inventions and
discoveries disclosed in said Assigned Application to CYTOGEN.
3.02 HOROSZIEWICZ warrants and represents that he has full right, title and
interest in and to the Assigned Application, Hybridoma, Antibody and Know-How;
that he has the power to make the assignment provided for in paragraph 3.01
hereinabove and to enter into this Agreement without burdens, encumbrances,
restraints or limitations of any kind which could adversely affect the right and
- 7 -
<PAGE>
title of CYTOGEN under this Agreement; and that there exist no outstanding
written or oral agreements or commitments of any kind inconsistent with this
Agreement to which HOROSZIEWICZ is a party.
3.03 HOROSZIEWICZ shall indemnify and hold harmless CYTOGEN against any and
all actions, suits, claims, demands, prosecutions, liabilities or judgments that
may be brought, instituted or arise against CYTOGEN based on the ownership by
CYTOGEN of the Assigned Application and its progeny as defined under "Patent
Assets" in Article I hereinabove, Know How and Improvements and the practice by
CYTOGEN, or any licensee of CYTOGEN, of the inventions disclosed in the Patent
Assets, Know How and Improvements.
ARTICLE IV
DELIVERY AND MAINTENANCE
4.01 CYTOGEN acknowledges delivery by HOROSZIEWICZ of samples of Hybridoma
and Antibody which, except for the expression by the Hybridoma of retroviral
reverse transcriptase, were delivered free of other immunoglobulins and non-
immunoglobulin contaminants and possessed the physical and chemical properties
stated in the KnowHow which was delivered to CYTOGEN simultaneously with the
delivery of Hybridoma and Antibody.
4.02 During the term of this Agreement and at the expense of Cytogen,
HOROSZIEWICZ and CYTOGEN shall maintain repositories of
- 8 -
<PAGE>
Hybridoma to ensure a supply of said Hybridoma to CYTOGEN and HOROSZIEWICZ in
the event of death or unfavorable modification of either party's supplies of
said Hybridoma. The details of said repositories (including quantities,
specific clones and sister clones to be maintained) shall be agreed to by the
parties in each instance. HOROSZIEWICZ may use the Hybridoma only to perform
research for CYTOGEN under this Agreement and for his own private, non-
transferrable research; HOROSZIEWICZ may not make the Hybridoma available to any
third party.
4.03 HOROSZIEWICZ shall forthwith and from time to time during the term of
this Agreement make available to CYTOGEN all Know-How relevant to the production
of Antibody from Hybridoma, including prompt notification to CYTOGEN of any data
or results which relate to a change in the characteristics or performance of
Hybridoma or Antibody.
ARTICLE V
CONSIDERATION, GRANT AND PAYMENTS
5.01 In consideration for,
(i) The Assignment provided for in paragraph 3.01 hereinabove; and,
(ii) The delivery of the Hybridoma, Antibody and Know-How; the
maintenance of the Hybridoma, and the availability of
- 9 -
<PAGE>
Know-How as provided for in Article IV hereinabove, the right and title to all
of which HOROSZIEWICZ hereby grants, assigns and transfers to CYTOGEN; and,
(iii) The right to possess and use the Hybridoma, Antibody and Know-
How in the Territory; and the right to make, have made, use and sell any and all
Payment Products under Patent Assets in the Field of Use throughout the
Territory, the right and title to all of which HOROSZIEWICZ hereby grants,
assigns and transfers to CYTOGEN; and,
(iv) Research to be performed by HOROSZIEWICZ in the field of
monoclonal antibodies useful in the treatment of prostatic cancer, under the
sponsorship of CYTOGEN in accordance with a protocol to be agreed to by the
parties and to be made part of this Agreement, and the Improvements and Know-How
developed by HOROSZIEWICZ during the course of said research, the right and
title to all of which HOROSZIEWICZ hereby grants, assigns and transfers to
CYTOGEN;
CYTOGEN shall pay HOROSZIEWICZ and/or his designee(s) the following
compensation:
(a) The sum of [Information omitted and filed separately with the
Commission under Rule 24b-2.] upon the Effective Date of this Agreement, which
sum shall be paid directly to Mr. S. Leslie Misrock, 1155 Avenue of the
Americas, New
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<PAGE>
York, New York 10036, to reimburse Mr. Misrock for his prior sponsorship of
HOROSZIEWICZ's research;
(b) The sum of [Information omitted and filed separately with the
Commission under Rule 24b-2.] said payment to be made directly to HOROSZIEWICZ
in four (4) equal quarterly installments of [Information omitted and filed
separately with the Commission under Rule 24b-2.], the first payment to be made
on a date within thirty (30) days from the Effective Date of this Agreement.
(c) A payment of [Information omitted and filed separately with the
Commission under Rule 24b-2.]
(d) In the event CYTOGEN licenses Payment Products to a non-affiliated
third party and receives a royalty on Net Sales by such non-affiliated third
party of such Payment Product, the payments due HOROSZIEWICZ under Section
5.01(c) of this Agreement shall be superceded and the net royalty actually
received by CYTOGEN from such third party shall be shared between CYTOGEN and
HOROSZIEWICZ as follows: [Information omitted and filed separately with the
ommission under Rule 24b-2.
- 11 -
<PAGE>
]
5.02 The payment provided for in sub-paragraph (c) of the paragraph 5.01,
Article V hereinabove due under Patent Assets shall continue until the date of
expiration of the last to expire of the Patent Assets in each country, whereupon
all further payments to HOROSZIEWICZ on Net sales under sub-paragraph (c),
paragraph 5.01, Article V in said country shall cease and no further payments
shall be due; provided however, (i) in those countries of the Territory wherein
a patent application as defined under "Patent Assets" in paragraph 2.11, Article
II hereinabove has been filed but shall not have issued into a corresponding,
valid and subsisting patent ten (10) years from the date of first
commercialization of a Payment Product in a given country of the Territory then,
in that event, no further royalties shall be due and payable to HOROSZIEWICZ
effective upon the date of expiration of said ten (10)-year period with respect
to each applicable country, and (ii) in those countries wherein an Assigned
Application or corresponding patent application has been filed and abandoned, no
further royalties shall be due and payable to HOROSZIEWICZ effective upon the
date of such abandonment; provided further, in those countries of the Territory
wherein a patent application as defined under "Patent Assets" in paragraph 2.11,
Article II hereinabove is pending and one or more of the Payment Products become
subject to substantial competition, the payment provided for in sub-paragraph
(c),
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<PAGE>
paragraph 5.01, Article V shall be suspended for so long as such competition
subsists. Substantial competition, as used herein, is intended to mean the sale
by any third party of a Product in excess of One Million Dollars ($1,000,000.00)
in each affected country.
ARTICLE VI
PAYMENT REMITTANCE AND RECORDS
6.01 Payments based on Net Sales as required under subparagraph (c),
paragraph 5.01, Article V to be made by CYTOGEN to HOROSZIEWICZ shall be made in
United States Dollars for each calendar quarter and each such payment shall
include the payments which shall have accrued during the subject calendar
quarter and shall be accompanied by a report setting forth separately the Net
Sales of Payment Products sold under Patent Assets during said calendar quarter
in each country of the Territory and the calculation of payments payable for
such calendar quarter. Payments based on United States sales shall be made
within sixty (60) days following the end of each calendar quarter, while
payments based on Net Sales outside the United States shall be made within
ninety (90) days following the end of each calendar quarter.
6.02 No payments shall be due on sales between CYTOGEN and its Affiliates;
between Affiliates, or between CYTOGEN and its licensees.
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<PAGE>
6.03 The remittance of payments payable under sub-paragraph (c), paragraph
5.01, Article V on Net Sales of Payment Products outside the United States shall
be made to HOROSZIEWICZ at the official rate of exchange of the currency of the
country from which the payments are payable (as quoted by the Citibank of New
York City) for the last business day of the calendar quarter in which the
payments were payable (less any withholding or transfer taxes which are
applicable). CYTOGEN shall supply HOROSZIEWIcz with proof of payment of such
taxes paid on CYTOGEN's behalf.
6.04 CYTOGEN shall keep and maintain records of sales made pursuant to the
rights granted hereunder. Such records shall be open to inspection at any
reasonable time during normal business hours within three (3) years after the
payment period to which such records relate by an independent Certified Public
Accountant (or equivalent in a foreign country) selected and paid for by
HOROSZIEWICZ, who shall have the right to examine the records kept pursuant to
this Agreement and to report findings of said examination of records to
HOROSZIEWICZ insofar as it is necessary to evidence any mistake or underpayment
on the part of CYTOGEN.
ARTICLE VII
PATENTS
7.01 CYTOGEN shall have full responsibility for the prosecution of the
Assigned Application in the United States Patent
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<PAGE>
and Trademark Office, including the payment of expenses, attorney fees related
thereto, and maintenance fees.
7.02 The selection of countries outside the United States in which the
Assigned Application and its progeny, as defined under "Patent Assets" in
Article I hereinabove shall be filed prior to the expiration of the Convention
Date under the Paris Convention in countries outside the United States; the
filing thereof, and the expenses relating to the prosecution and maintenance
thereof, including attorney fees, annuities and taxes, shall be the
responsibility of CYTOGEN. CYTOGEN shall promptly advise HOROSZIEWICZ of its
decisions relating to filing in countries outside the United States. In the
event HOROSZIEWICZ determines that certain countries of the world outside the
United States should be added to the list of those wherein filing of the progeny
of Assigned Application has been decided upon by CYTOGEN then, in that event,
HOROSZIEWICZ shall be free to effectuate such filing, including payment for
subsequent prosecution, maintenance, taxes and annuities, at his own expense.
CYTOGEN shall aid HOROSZIEWICZ by providing him with all documents necessary to
accomplish such filing.
7.03 CYTOGEN shall have sole responsibility for the selection of patent
counsel to file, prosecute and maintain the Patent Assets in all countries of
the Territory.
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<PAGE>
ARTICLE VIII
CREDIT
8.01 All payments made by CYTOGEN to HOROSZIEWICZ under subparagraphs (a) and
(b), paragraph 5.01, Article V hereinabove and all payments made by CYTOGEN to
HOROSZIEWICZ relating to expenses applicable to filing, prosecution, attorney
fees, maintenance, taxes and annuities under paragraphs 7.01 and 7.02, Article
VII hereinabove, shall be credited against payments due and payable under sub-
paragraph (c), paragraph 5.01, Article V and paragraph 6.01, Article Vi
hereinabove.
ARTICLE IX
INFRINGEMENT
9.01 In the event CYTOGEN is sued by a third party charging infringement of a
patent resulting from the manufacture, use or sale by CYTOGEN of a Payment
Product, CYTOGEN shall promptly notify HOROSZIEWICZ and may, at its option and
in its sole discretion, discontinue the manufacture, use or sale of a Payment
Product in the applicable country. In the event the suit is continued, CYTOGEN
shall have the right, during the period in which any such suit is pending, to
apply all of its litigation expenses in such suit against the payments due
HOROSZIEWICZ under sub-paragraph (c), paragraph 5.01, Article V and paragraph
6.01, Article VI hereinabove.
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<PAGE>
9.02 In the event of a judgment in any suit requiring CYTOGEN to (a) pay
royalty to (b) grant a sublicense to or (c) enter into a cross-licensing
arrangement with a third party, or in the event of a settlement of such suit
requiring royalty payments to be made, licenses granted, or cross-licensing
entered into, payments due HOROSZIEWICZ under sub-paragraph (c), paragraph 5.01,
Article V hereinabove shall be correspondingly reduced by the amounts due under
the requirement of such judgment or under the terms of such settlement; provided
however, that such reduction shall not reduce the payments due HOROSZIEWICZ
under sub-paragraph (c), paragraph 5.01, Article V to an amount less than one-
half (1/2) of the amount which would otherwise be due HOROSZIEWICZ thereunder.
9.03 In the event CYTOGEN shall be compelled by a governmental agency to
grant a compulsory license to a third party in any country of the Territory
wherein Patent Assets are subsisting, under laws applicable to such country, on
terms more favorable than those granted CYTOGEN under this Agreement, including,
but not limited to the payments due HOROSZIEWICZ under sub-paragraph (c),
paragraph 5.01, Article V and paragraph 6.01, Article VI hereinabove, at a rate
lower than those required to be paid by CYTOGEN, then CYTOGEN shall promptly
notify HOROSZIEWICZ of such compulsory license and the terms applicable under
such compulsory license shall supersede the corresponding terms under this
Agreement as at the date on which such compulsory license shall have become
effective.
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<PAGE>
9.04 Each party shall promptly notify the other party if it becomes aware of
any infringement of Patent Assets. CYTOGEN shall have no obligation to
HOROSZIEWICZ to initiate litigation or otherwise protect any patent or
proprietary right assigned under this Agreement and shall be free to pursue any
course of action it elects to take in connection with such acts of infringement
by third parties. In the event CYTOGEN decides to initiate or to fully
participate in any legal action initiated by a third party to protect its
interests, HOROSZIEWICZ shall cooperate with CYTOGEN in such action. If CYTOGEN
elects to institute suit against a third party to protect any patent or
proprietary rights assigned under this Agreement, all associated costs
(including reasonable attorney fees) which have been paid by CYTOGEN shall be
offset against any payments due and payable to HOROSZIEWICZ under subparagraph
(c), paragraph 5.01, Article V and paragraph 6.01, Article VI hereinabove.
ARTICLE X
COMMERCIAL DEVELOPMENT AND RE-ASSIGNMENT
10.01 CYTOGEN agrees to use reasonable efforts to commercialize the Antibody as
soon as reasonably practicable, consistent with its sound and reasonable
business practices and judgment. CYTOGEN shall advise HOROSZIEWICZ in writing
on an annual basis regarding its efforts toward commercial development of the
Antibody. Such progress reports by CYTOGEN shall continue until either (a) the
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<PAGE>
Antibody shall have been commercialized by CYTOGEN or (b) CYTOGEN, in its
judgment, shall conclude that the marketing and commercialization of the
Antibody is impracticable, inadvisable or not feasible, and shall so advise
HOROSZIEWICZ in writing.
10.02 In the event that CYTOGEN (a) fails to continue reasonable efforts toward
commercial development of the Antibody, or (b) decides against marketing the
Antibody as described in paragraph 10.01 of this Article X within five (5) years
from the Effective Date of this Agreement, CYTOGEN shall re-assign the Assigned
Application and its progeny, as defined in "Patent Assets" under Article I
hereinabove to HOROSZIEWICZ and the assignments made to CYTOGEN by HOROSZIEWICZ
hereunder shall automatically be converted to non-exclusive license rights. In
the event of such automatic conversion, (i) the payment rate provided for in
subparagraph (c), paragraph 5.01, Article V hereinabove shall be reduced from
[Information omitted and filed separately with the Commission under Rule 24b-
2.], which payment shall be payable for the periods of time provided for in
paragraph 5.02, Article V hereinabove commencing with the date of such automatic
conversion, and (ii) all further responsibility by CYTOGEN under Article VII
shall cease.
ARTICLE XI
TERM AND TERMINATION
11.01 Unless sooner terminated as herein provided, this Agreement shall
continue in full force and effect for the time
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<PAGE>
commencing with the Effective Date and continuing (a) as to those countries of
the Territory wherein issued and valid patents as defined under "Patent Assets"
are subsisting, until the date of expiration of the last such patent in such
country, and (b) as to those countries of the Territory wherein the Assigned
Application or a corresponding patent application has been filed and (i) is
pending, until the date ten (10) years following the date of first commercial
sale in the applicable country, for so long as said patent application is
pending, or (ii) has been abandoned, until the date of abandonment. Upon the
expiration of any of the applicable dates provided for in (a) and (b) of this
paragraph 11.01, the payments required under sub-paragraph (c), paragraph 5.01,
Article V shall be fully paid upon such date and, as provided in paragraph 5.02.
Article V hereinabove, no further payments shall be due HOROSZIEWICZ as to the
applicable country.
ARTICLE XII
ASSIGNABILITY
12.01 This Agreement is not assignable by either party except with the prior
written consent of the other and except that it may be assigned without consent
(i) by HOROSZIEWICZ in whole or in part to a private charitable trust and/or
public foundation (qualifying under Section 501(c) (3) of the Internal Revenue
Code) for cancer research, and (ii) by CYTOGEN to the successor of CYTOGEN or to
a
- 20 -
<PAGE>
person acquiring all or substantially all of the business and/or assets of
CYTOGEN.
ARTICLE XIII
NOTICE
13.01 Any notice required under this Agreement shall be in writing and shall
be considered given one day after such notice, properly addressed and shipped
overnight service, is sent by either party to the other. Proper address for
notice is as follows:
if to HOROSZIEWICZ:
Julius S. Horosziewicz, M.D., DMSC.
Senior Research Scientist
Department of Urology
Millard Fillmore Hospital
3 Gates Circle
Buffalo, New York 14209 c/o Ms. Ramena Bober
with copies to:
S. Leslie Misrock, Esq-
Pennie & Edmonds
1155 Avenue of the Americas
New York, New York 10036
if to CYTOGEN:
Thomas J. McKearn, M.D., PhD.
Senior Vice President
Scientific Affairs
Cytogen Corporation
201 College Road East
Princeton, New Jersey 08540
- 21 -
<PAGE>
with copies to:
William J. Ryan, Esq.
Vice President & General Counsel
Cytogen Corporation
600 College Road East
Princeton, New Jersey 08540
ARTICLE XIV
MISCELLANEOUS
14.01 This Agreement constitutes the entire Agreement between the
parties and supersedes all written and oral prior agreements or understandings.
No variation or modification of the terms or provisions of this Agreement shall
be valid unless in writing and signed by both parties.
14.02 Waiver by CYTOGEN or HOROSZIEWICZ of any single default or breach
or succession of defaults or breaches by the other shall not deprive the waiving
party of any right to terminate this Agreement arising out of any subsequent
breach.
14.03 All matters affecting the interpretation, validity and
performance of this Agreement shall be governed by the laws of the State of New
York.
14.04 (a) CYTOGEN shall indemnify and hold harmless HOROSZIEWICZ
against any and all actions, suits, claims, demands, prosecutions, liabilities
or judgments that may be brought,
- 22 -
<PAGE>
instituted or arise against HOROSZIEWICZ based on or arising out of an action by
CYTOGEN under this Agreement relating to the following:
(i) the use by third parties of Antibody sold or supplied by
CYTOGEN;
(ii) the manufacture, packaging, use, sale, or other distribution
of products containing Antibody by CYTOGEN;
(iii) any representation made or warranty given by CYTOGEN with
respect to the Hybridoma or Antibody;
(iv) the distribution or the use by CYTOGEN of the Hybridoma or
Antibody.
(b) Upon the filing of any suit or claim, HOROSZIEWICZ shall permit
CYTOGEN's attorneys, at CYTOGEN's discretion and cost, to handle and control the
defense of any such claim or suit, provided that attorneys retained by
HOROSZIEWICZ at his own expense shall be permitted to join in any such defense.
No party shall settle any such claim or suit without the prior written consent
of the other party, which shall not be unreasonably withheld.
(c) CYTOGEN shall not indemnify or hold harmless HOROSZIEWICZ against
any action, suit, claim, demand prosecution,
- 23 -
<PAGE>
liability or judgment that may be brought, instituted or arise against
HOROSZIEWICZ based on or arising out of any negligence or action of
HOROSZIEWICZ, including further research on Hybridoma or on Antibody.
IN WITNESS WHEREOF, HOROSZIEWICZ and CYTOGEN have caused this
Agreement to be executed in duplicate; HOROSZIEWICZ personally and CYTOGEN by
its duly authorized officer.
/s/ Julius S. Horosziewicz, M.D., D.Msc
- ----------------------------------------
Julius S. Horosziewicz, M.D., DMSc.
April 20, 1989
- ----------------------------------------
Date
CYTOGEN CORPORATION
By:/s/ W.J. Ryan
--------------------
Name: W.J. Ryan
------------------
Title: Vice President
-----------------
April 18, 1989
- -----------------------
Date
- 24 -
<PAGE>
Exhibit 21
Subsidiaries of CYTOGEN Corporation
Cellcor, Inc., a Delaware corporation, is a wholly-owned subsidiary 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
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, Form S-3 Registration Statement (File No. 33-77396) filed
with the Securities and Exchange Commission on April 6, 1994, Form S-8
Registration Statement (File No. 33-63321), filed with the Securities and
Exchange Commission on October 10, 1995 and Form S-8 Registration Statement
(File No. 333-00431), filed with the Securities and Exchange Commission on
January 25, 1996.
ARTHUR ANDERSEN LLP
Philadelphia, PA
March 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 27,551,000
<SECURITIES> 1,201,000
<RECEIVABLES> 820,000
<ALLOWANCES> (536,000)
<INVENTORY> 356,000
<CURRENT-ASSETS> 30,135,000
<PP&E> 16,385,000
<DEPRECIATION> (10,923,000)
<TOTAL-ASSETS> 37,149,000
<CURRENT-LIABILITIES> 8,598,000
<BONDS> 0
0
0
<COMMON> 460,000
<OTHER-SE> 24,816,000
<TOTAL-LIABILITY-AND-EQUITY> 37,149,000
<SALES> 1,377,000
<TOTAL-REVENUES> 5,842,000
<CGS> 0
<TOTAL-COSTS> 7,476,000
<OTHER-EXPENSES> 70,293,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 593,000
<INCOME-PRETAX> (72,520,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (72,520,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> (2.11)
<EPS-DILUTED> 0
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