SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED DECEMBER 31, 1995
Commission File Number 0-14758
SOMATIX THERAPY CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2762045
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
850 Marina Village Parkway, Alameda, California
- -------------------------------------------------------------------------------
94501
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(zip code)
(510) 748-3000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
---- ----
The number of shares outstanding of each of the issuer's classes of common
stock as of:
Class Outstanding at December 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Stock, $0.01 Par Value 22,990,142
Preferred Stock, $0.01 Par Value 231,971
<PAGE>
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of
December 31, 1995 and June 30, 1995 . . . . . . . . . . . . . 1,2
Consolidated Statements of Operations
for the Three and Six Months Ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows
for the Three and Six Months Ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . . 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . 7
Item 2. Changes in Securities . . . . . . . . . . . . . . . 7
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . 7
Item 5. Other Information . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 8
Exhibits Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
<TABLE>
SOMATIX THERAPY CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
December 31, June 30,
1995 1995
(unaudited)
-------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . $ 3,182,000 $14,326,000
Marketable securities . . . . . . . . . . . 11,567,000 250,000
Other current assets . . . . . . . . . . . 786,000 726,000
----------- -----------
Total current assets . . . . . . . . 15,535,000 15,302,000
Marketable securities, long-term . . . . . . . 103,000 --
Restricted cash . . . . . . . . . . . . . . . . 650,000 300,000
Equipment and improvements, at cost:
Laborabory and production equipment . . . . 4,074,000 3,942,000
Equipment under capital leases . . . . . . 3,120,000 3,078,000
Furniture and office equipment . . . . . . 1,141,000 1,115,000
Leasehold improvements . . . . . . . . . . 3,827,000 3,781,000
----------- -----------
12,162,000 11,916,000
Less accumulated depreciation and
amortization 9,454,000 8,523,000
----------- -----------
Net equipment and improvements . . . . . . 2,708,000 3,393,000
----------- -----------
Other assets . . . . . . . . . . . . . . . . . 158,000 133,000
----------- -----------
$19,154,000 $19,128,000
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
SOMATIX THERAPY CORPORATION
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
December 31, June 30,
1995 1995
(unaudited)
------------ --------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . $ 1,947,000 $ 2,642,000
Accrued compensation and related expenses . . . . . . . . . . . . . 826,000 992,000
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . 786,000 718,000
Accrued restructuring costs . . . . . . . . . . . . . . . . . . . . 421,000 859,000
Other current liabilities . . . . . . . . . . . . . . . . . . . . . 186,000 186,000
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 4,166,000 5,397,000
Capital lease obligations, net of current portion 1,409,000 1,692,000
Accrued restructuring costs,
net of current portion . . . . . . . . . . . . . . . . . . . . . . . 1,022,000 1,288,000
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,000 262,000
Stockholders' equity
Series A preferred stock, par value $0.01 per share, 1,000,000 shares
authorized; 231,971 shares, issued and outstanding
(254,000 at June 30, 1995) . . . . . . . . . . . . . . . . . . . . . . 2,000 3,000
Common stock, par value $0.01 per share,
40,000,000 shares authorized,
22,990,142 issued and outstanding
(20,991,996 at June 30, 1995) . . . . . . . . . . . . . . . . . . . . 230,000 210,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 171,280,000 159,749,000
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (159,153,000) (149,473,000)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 12,359,000 10,489,000
------------ ------------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,154,000 19,128,000
============ ============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
SOMATIX THERAPY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
December 31, December 31, December 31, December 31,
1995 1994 1995 1994
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Research Agreement . . . . . . . . . $ -- $ -- $ -- $ 250,000
Costs and expenses:
Research and development . . . . . . 4,244,000 4,575,000 8,131,000 8,795,000
General and administrative 1,063,000 1,006,000 1,970,000 2,013,000
------------- ---------- ------------ ------------
Total costs and expenses . . . . 5,307,000 5,581,000 10,101,000 10,808,000
------------- ------------ ------------ ------------
Operating loss . . . . . . . . . . . . . (5,307,000) (5,581,000) (10,101,000) (10,558,000)
Other income, net . . . . . . . . . . . . 203,000 80,000 421,000 239,000
------------- ------------ ----------- -----------
Net loss . . . . . . . . . . . $ 5,104,000) $ (5,501,000) $ (9,680,000) $ (10,319,000)
================= ================ ================ ================
Net loss per share . . . . . . . . . . . $ (0.22) $ (0.35) $ (0.43) $ (0.65)
================ ================= ================ ================
Shares used in calculation of
net loss per share............... 22,744,967 15,787,783 22,282,529 15,768,691
</TABLE>
Quarterly paid-in-kind dividend on preferred stock was distributed at December
31, 1995 in the amount of 3,920 preferred shares.
See accompanying notes.
<PAGE>
<TABLE>
SOMATIX THERAPY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended December 31,
------------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,680,000) $ 10,319,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 931,000 921,000
Decrease (increase) in
other current assets . . . . . . . . . . . . . . . . . . (60,000) 36,000
Decrease (increase) in other assets . . . . . . . . . . . . (25,000) 11,000
Increase (decrease) in accounts payable
and accrued liabilities . . . . . . . . . . . . . . . . (695,000) 546,000
Increase (decrease) in accrued compensation
and related expenses . . . . . . . . . . . . . . . . . . (166,000) 339,000
Decrease in accrued restructuring cost . . . . . . . . . . (704,000) --
Increase (decrease) in other
liabilities . . . . . . . . . . . . . . . . . . . . . . (64,000) 22,000
------------ ------------
Net cash used in operating
activities . . . . . . . . . . . . . . . . . . . . . (10,463,000) (8,444,000)
Cash flows from investing activities:
Sales of marketable securities . . . . . . . . . . . . . . . . 1,700,000 16,175,000
Purchase of marketable securities . . . . . . . . . . . . . . (13,120,000) (5,776,000)
Increase in restricted cash . . . . . . . . . . . . . . . . . (350,000) (50,000)
Purchase of equipment and
improvements . . . . . . . . . . . . . . . . . . . . . . . (246,000) (1,006,000)
------------ ------------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . . . . . (12,016,000) 9,343,000
Cash flows from financing activities:
Borrowings under sale/leaseback
agreement . . . . . . . . . . . . . . . . . . . . . . . . . 179,000 555,000
Principal payments under capital
lease obligations . . . . . . . . . . . . . . . . . . . . . (394,000) (298,000)
Net proceeds from issuance of
common stocks . . . . . . . . . . . . . . . . . . . . . . . 11,550,000 13,000
------------- -----------
Net cash provided by
financing activities . . . . . . . . . . . . . . . . . 11,335,000 270,000
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . (11,144,000) 1,169,000
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . . . . . . . . . . . 14,326,000 777,000
------------ -------------
Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,182,000 $ 1,946,000
============ =============
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . $ 162,000 $ 136,000
See accompanying notes.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. Basis of Presentation
----------------------
The information at December 31, 1995 and 1994, and for the periods then
ended, is unaudited, but includes all adjustments (consisting only of normal
recurring entries) which the Company's management believes to be necessary for
the fair presentation of the financial position, results of operations and
changes in cash flows for the periods presented. Interim results are not
necessarily indicative of results for a full year. The accompanying consolidated
financial statements should be read in conjunction with the Company's audited
financial statements for the fiscal year ended June 30, 1995.
2. Per Share Information
---------------------
Per share information is based on the weighted average number of shares of
common stock outstanding during each period. Shares issuable upon the conversion
of preferred stock to common stock and shares issuable upon the exercise of
outstanding options and warrants to purchase shares of the Company's common
stock (common stock equivalents) are not included in the calculation of the net
loss per share for the three and six month periods ended December 31, 1995 and
1994, since their inclusion would be anti-dilutive.
3. Accrued Restructuring Costs
---------------------------
On June 29, 1995, the Company completed a restructuring and cost savings
program separating its research and development infrastructure into two groups.
The development group will focus on clinical trials and product development and
the research group will focus on gene transfer technologies for various medical
applications. At December 31, 1995, accrued restructuring balance was $1,443,000
consisting principally of future rent obligations.
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And
- --------------------------------------------------------------------------------
Results Of Operations
- ---------------------
Results Of Operations
- ---------------------
Somatix Therapy Corporation ("Somatix" or the "Company") is a research and
development company in the field of gene therapy. Absent significant funding
from research collaborations, the Company expects costs and expenses to exceed
revenues in future periods. This will result in increasing losses for the next
several years.
There were no revenues for the three and six month periods ended December
31, 1995 compared to $250,000 in the six month period in the prior fiscal year.
Prior fiscal year revenues were derived from a research agreement.
Research and development expenses for the three and six month periods ended
December 31, 1995 decreased by $331,000 and $664,000, respectively, from the
same periods in the prior fiscal year. The decrease is due to the Company's
restructuring and cost savings program. In future periods, the Company expects
to incur increases in expense in support of expanded on-going clinical trials
and initiation of clinical trials for additional indications.
Other income consists principally of interest income earned on the
Company's cash reserves. The increase, to $421,000 in the six months of fiscal
year 1996, from $239,000 for the same period in fiscal year 1995, was primarily
due to larger cash balances available for investment.
Liquidity And Capital Resources
- --------------------------------
On December 31, 1995, the Company had cash, cash equivalents, and
marketable securities of $14,852,000, compared with $14,576,000 on June 30,
1995. Operating expenses have exceeded revenues for a number of years. For the
six-month period ended December 31, 1995, capital expenditures amounted to
$246,000. The Company expects its cash requirements and net losses to increase
significantly in future periods due to higher research and development costs,
the cost of phase III clinical trials due to start in the quarter ending June
30, 1996, and other expenses. The Company has no material capital commitments.
Given its current operating plans, the Company anticipates that its
existing cash will be sufficient to meet its cash requirements for the next nine
months. The Company's future cash requirements will depend upon many factors,
including the progress of the Company's research and development, the scope and
results of preclinical studies and clinical trials, the expense in conjunction
with obtaining regulatory approvals, the rate of technological advances, the
determination of the commercial potential of the Company's products under
development, the status of competitive products, and the establishment of
production capacity for clinical trials. The Company anticipates that it will be
required to raise substantial additional funds, through collaborative research,
development and commercialization relationships and public or private
financings. While the Company's agreement with Bristol-Myers Squibb calls for
Bristol-Myers Squibb to make a $10 million equity investment upon the Company
obtaining regulatory approval to start a phase II/III clinical trial,
consummation of any other such transaction would be subject to numerous
conditions and contingencies, and there can be no assurance that any such
transaction will occur in the near term, if at all. The Company may also seek to
access the public equity markets if and when conditions are favorable, even if
it does not have an immediate need for additional cash at that time. If
financing opportunities are not available to the Company, it will adjust its
operating plans accordingly.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
------------------
Item 2. Changes in Securities. None.
----------------------
Item 3. Defaults Upon Senior Securities. None.
-------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
On November 16, 1995, at the Company's 1995 Annual Meeting of Security
Holders, the following matters were submitted and voted on by security holders
and were adopted:
A. The election of: David W. Carter; Karen Davis Ph.D.; Michael R.
Eisenson; Fred H. Gage, Ph.D.; Harry F. Hixson, Jr. Ph.D.; Richard C.
Mulligan, Ph.D.; John T. Potts, Jr., M.D.; Thomas E. Shenk, Ph.D.; Samuel
D. Waksal, Ph.D.; Leon E. Rosenberg, M.D. by the stockholders to serve on
the board of directors.
The results of the vote are as follows:
<TABLE>
Total Vote For Total Vote Withheld
Each Director From Each Director
------------- ------------------
<S> <C> <C>
David W. Carter 16,443,137 61,579
Karen Davis, Ph.D. 16,442,412 62,304
Michael R. Eisenson 16,448,612 56,104
Fred H. Gage, Ph.D. 16,450,137 54,579
Harry F. Hixson, Jr., Ph.D. 16,450,512 54,204
Richard C. Mulligan, Ph.D. 16,440,012 64,704
John T. Potts, Jr., M.D. 16,450,612 54,104
Thomas E. Shenk, Ph.D. 16,450,412 54,304
Samuel D. Waksal, Ph.D. 16,450,312 54,404
Leon E. Rosenberg, M.D. 16,449,612 55,104
</TABLE>
B. The approval of an amendment to the Company's 1992 Stock Option Plan (the
"Option Plan") to render non-employee members of the Board of Directors,
other than those individuals who are also at the time serving on the
Compensation Committee which administers the Option Plan, eligible to
participate in the Discretionary Option Grant Program in effect under the
Option Plan so that they may receive options under both the Discretionary
Option Grant Plan and the Automatic Option Grant Program.
The results are as follows:
For Against Abstain No Vote
--- ------- ------- -------
13,249,979 2,348,623 319,941 586,173
C. The ratification of Ernst & Young, LLP as independent auditors of the
Company for fiscal year ending June 30, 1996.
The results are as follows:
For Against Abstain No Vote
--- ------- ------- -------
16,183,605 28,000 293,111 0
Item 5. Other Information. None.
-----------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
<PAGE>
The following documents are referenced or included in this report:
Exhibit
No.
- -------
3.1 1/ Amended and Restated Certificate of Incorporation effective
November 29, 1994.
3.2 2/ Certificate of Designation of Preferences of Preferred Shares
effective June 27, 1995.
3.3 3/ Bylaws, as amended and restated September 14, 1995.
4.1 Reference Exhibits 3.1, 3.2 and 3.3.
10.1 Amendment No. 2 to the Warrant Agreement and Shareholder Agreement,
dated November 9, 1995, by and among Somatix Therapy Corporation
and Kleiner Perkins Caufield and Byers V.
10.2 Mutual Termination Agreement dated September 29, 1995 between
Somatix and Baxter Healthcare Corporation.
27 Financial Data Statement
1/ Incorporated by reference to exhibit filed with registrant's Amendment No. 1
to Current Report on Form 8-K/A as filed with the SEC on February 14, 1995.
2/ Incorporated by reference to exhibit of the registrant's Registration
Statement on Form S-3 (File No. 33-60873) as filed with the SEC on
June 19, 1995.
3/ Incorporated by reference to exhibit of the registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995.
(b) Reports on Form 8-K. No reports on Form 8-K were filed in the
quarter ended December 31, 1995.
<PAGE>
SOMATIX THERAPY CORPORATION
December 31, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DATE: February 8, 1996 SOMATIX THERAPY CORPORATION
DATE: February 8, 1996 By: DAVID W. CARTER
---------------
David W. Carter
President, Chief Executive Officer and
Chairman of the Board
DATE: February 8, 1996 By: MARK N. K. BAGNALL
------------------
Mark N. K. Bagnall
Vice President, Finance (Principal
Financial and Accounting Officer)
<PAGE>
AMENDMENT #2
TO THE
WARRANT AGREEMENT AND
SHAREHOLDER AGREEMENT
This Amendment Agreement (the "Agreement") is made as of this ____
day of November, 1995, by and among Somatix Therapy Corporation, a Delaware
corporation (the "Company"), GeneSys Therapeutics Corporation, a California
corporation ("GeneSys") and Kleiner Perkins Caufield & Byers V, a California
limited partnership ("KPCB V").
WHEREAS, GeneSys and KPCB V entered into that certain Warrant
Agreement dated November 9, 1991 (the "Warrant Agreement") pursuant to which
GeneSys agreed to issue and sell and KPCB V agreed to purchase for the price of
One Thousand Dollars ($1000.00) warrants to purchase up to an aggregate of
993,740 shares of GeneSys Series B Preferred Stock (the "Warrant");
WHEREAS, on or about January 17, 1992, GeneSys became a wholly-owned
subsidiary of the Company, subject only to the exercise of the Warrant;
WHEREAS, by its terms, the Warrant is exercisable for shares of
Series B Preferred Stock of GeneSys (the "Shares") at any time from November 9,
1992 to November 9, 1994 at an exercise price of $2.0126 per share;
WHEREAS, the Company, GeneSys and KPCB V entered into a Shareholder
Agreement dated January 21, 1992 (the "Shareholder Agreement"), which agreement
sets forth certain rights and restrictions with regard the Shares including,
among other things, (i) a "Put Option" exercisable by KPCB V to exchange the
Shares received upon exercise of the Warrant for shares of the Company's Common
Stock based upon an exchange ratio of .35095 (subject to certain adjustments)
and (ii) the calculation of "Appreciation Currency" for purposes of determining
the price payable by KPCB V upon exercise of the Warrant;
WHEREAS, on or about November 7, 1994, the parties agreed to extend
the term of the Warrant Agreement; and
WHEREAS, the parties hereto wish to amend the Warrant Agreement to
extend the term of the Warrant upon the terms and conditions contained herein;
and
WHEREAS, the parties hereto wish to amend the Shareholder Agreement
to incorporate into the Shareholder Agreement the amendment to the Warrant
Agreement and the extension of the term of the Warrant upon the terms and
conditions contained herein.
<PAGE>
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Section 3 of the Warrant Agreement, as amended, is hereby amended
to extend the term of exercise of the Warrant for a period of one (1) year on a
quarterly basis until November 9, 1996, subject to earlier expiration upon
notice from the Company to the Warrantholder ten (10) days prior to the last day
of the quarters ended on February 9, 1996, May 9, 1996, August 9, 1996 and
November 9, 1996.
2. In consideration of the Company's agreement to extend the term of
the Warrant, and for other good and valuable consideration, receipt of which is
hereby acknowledged, KPCB V agrees that it will not offer, sell, contract to
sell, or grant any option to purchase or otherwise dispose (including, without
limitation, a distribution to KPCB V's limited partners) of any Common Stock, or
any securities convertible into or exchangeable for Common Stock, of the Company
(including, without limitation, Common Stock of the Company that may be deemed
to be beneficially owned by KPCB V in accordance with the rules and regulations
of the Securities Exchange Act of 1934 and Common Stock that may be issued upon
exercise of a stock option or warrant), or rights to acquire such Common Stock,
until November 9, 1996.
3. A new warrant and form of election to purchase Shares (the
"Replacement Warrant") shall be issued to KPCB V in exchange for the Warrant in
substantially the form set forth in Exhibit A attached hereto.
4. The Shareholder Agreement is hereby amended so that any reference
made therein to the "Warrant Agreement" is hereby replaced with "Amendment #2 to
the Warrant Agreement" and any reference made therein to "Warrant" is hereby
replaced with "Replacement Warrant."
5. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6. Except as otherwise provided for herein, the existing terms of
the Shareholder Agreement and Warrant Agreement shall remain in full force and
effect.
2.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
SOMATIX THERAPY CORPORATION
By: DAVID W. CARTER
--------------------------
David W. Carter, Chairman, President and
Chief Executive Officer
GENESYS THERAPEUTICS CORPORATION
By:
-------------------------------
KLEINER PERKINS CAUFIELD & BYERS V
By:
-------------------------------
3.
MUTUAL TERMINATION AGREEMENT
THIS MUTUAL TERMINATION AGREEMENT (the "Termination Agreement"),
between BAXTER HEALTHCARE CORPORATION, a Delaware corporation ("Baxter"), having
its principal place of business located at One Baxter Parkway, Deerfield,
Illinois, and SOMATIX THERAPY CORPORATION, a Delaware corporation ("Somatix"),
having its principal place of business located at 1301 Marina Village Parkway,
Suite 310, Alameda, California, is entered into as of September 29, 1995 (the
"Effective Date").
WHEREAS, under the Research Collaboration Agreement between Baxter
and Somatix dated as of April 28, 1994, as amended as of April 20, 1995 (the
"Agreement"), the parties entered into a cooperative research arrangement to
study the use of T-Body gene therapy to treat cancer with the goal of developing
products for such treatment (the "Research Collaboration Program").
WHEREAS, the parties have determined that, based upon the results
obtained in the Research Program, proceeding with the Research Program under the
Agreement is not in the best interests of the parties, and the parties have
reached a mutual understanding to terminate the Research Collaboration Program
as contemplated in the Agreement and therefore to terminate the Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
1. All terms used in this Termination Agreement, unless otherwise
defined herein, shall have the meanings assigned to them in the Agreement.
2. Baxter and Somatix mutually agree, pursuant to Section 11.1 of
the Agreement and by this Termination Agreement, to terminate the Agreement
(which is attached hereto as Exhibit 2.0) and performance of the Research
Collaboration Program thereunder, and, except as specifically provided herein,
to terminate all terms and provisions of the Agreement and all rights and
obligations of either party under the Agreement.
3. As provided in Section 3.1.5 of the Agreement, Baxter and Somatix
each acknowledges that, in the course of performing the Research Collaboration
Program, it has received information and biological materials of the other that
constitutes Confidential Information of the receiving party as defined in
Section 8.1 of the Agreement. Each agrees that, as provided in Section 8.1 of
the Agreement, all uses of such
<PAGE>
Confidential Information by the receiving party, and the limited licenses
granted by each party to the other under Article 6 of the Agreement, are hereby
terminated. In addition, each of Baxter and Somatix as a receiving party agrees
to destroy, within thirty (30) days of the Effective Date, all such information
and biological materials provided to the receiving party by the disclosing
party, and to demonstrate such destruction by executing and providing to the
disclosing party the certification attached hereto as Exhibit 3.0.
4. Baxter and Somatix each represents that it has disclosed all
Inventions known to it to the other party, and, that, for a period of one (1)
year after the Effective Date, each will disclose any additional Inventions of
which it becomes aware to the other party. Baxter and Somatix agree that, as of
the Effective Date, there are no Joint Inventions or Joint Patent Rights, and
that, if any Joint Inventions become known to either party after the Effective
Date, the parties shall determine whether a patent application should be filed
and prosecuted and each shall assist the other as necessary and reasonable in
providing information, documents, signatures or other assistance in such
preparation. Absent a mutual written agreement to the contrary, each party shall
have full rights to use any such Joint Inventions or Joint Patent Rights without
the consent of or payments to the other party as provided in Section 11.4.1 of
the Agreement.
5. Baxter and Somatix each represents that, directly to the other
party or through the Advisory Committee as provided in Section 3.3.3 of the
Agreement, it has disclosed to and provided copies of all documents prepared to
be or filed with a regulatory agency as part of the Regulatory Approval process
for any T-Body Product developed pursuant to the Research Collaboration Program.
Baxter and Somatix each agrees that neither party shall have the right to use
any such documents or filings as part of the Regulatory Approval process for any
product without the written consent of the other party.
6. Baxter and Somatix each represents that, except for those shown
on Exhibit 6.0(a) (the continuation of which each party hereby consents), all
subcontracts or other contractual or other commitments relating to performance
of the Research Collaboration Program which either or both of them have entered
or made have been terminated in writing and that all such written terminations
are attached hereto as Exhibit 6.0(b).
7. Somatix hereby acknowledges receipt of the initial payment by
Baxter under Section 4.1 of the Agreement and agrees that Baxter has no
obligation to make and Somatix is not entitled to receive the milestone payment
under Section 4.2 of the Agreement. Baxter and Somatix mutually agree that
neither of
2.
<PAGE>
them is entitled to any additional payments pursuant to the terms of the
Agreement, including but not limited to under Section 3.2, Article 4 or Article
5, and that no joint venture was formed as contemplated by Article 5 of the
Agreement. In addition, Somatix agrees that the equipment listed on Exhibit 7.0
currently is the sole property of Baxter and further agrees to purchase it from
Baxter by paying to Baxter the total amount shown on Exhibit 7.0 in immediately
available funds within thirty (30) days of the Effective Date.
8. Baxter and Somatix mutually agree that Article 7 "Exclusivity" is
hereby explicitly terminated, that each waives all rights which could have
arisen thereunder and that each releases the other from any and all claims for
damages or injunctive relief thereunder. Attached hereto as Exhibit 8.0 is a
letter dated August 3, 1995, signed by Somatix on August 15, 1995, under which
Somatix consented to Baxter initiating discussions with third parties prior to
execution of this Termination Agreement.
9. Baxter and Somatix each agrees that its contractual right to be
indemnified under Sections 12.1 and 12.2 of the Agreement hereby terminates as
to all breaches, acts or omissions of the other party which have arisen prior to
the Effective Date or may arise thereafter.
10. Unless otherwise specifically addressed in this Termination
Agreement, the provisions of Articles 8 and 9 of the Agreement shall survive the
execution of this Termination Agreement. Articles 13, 14, 15 and 16 of the
Agreement are incorporated herein and made a part hereof. In addition, the Stock
Purchase Agreement is not terminated or otherwise affected by the provisions of
this Termination Agreement.
IN WITNESS WHEREOF, the parties have executed this Termination
Agreement to be effective as of the Effective Date.
SOMATIX THERAPY CORPORATION
By:________________________
Title:_____________________
Date:______________________
BAXTER HEALTHCARE CORPORATION
By:__________________________
Title:_______________________
Date:________________________
3.
<PAGE>
EXHIBIT 3.0
DESTRUCTION OF MATERIALS
CREATED UNDER T-BODY
RESEARCH COLLABORATION
AGREEMENT
Signature certifies the destruction of materials referenced in the attached list
by inventory number and/or laboratory notebook references generated at _________
under
[Baxter Healthcare Corporation]
[Somatix Therapy Corporation]
the research collaboration.
Signature__________________ Witness_________________________
Title______________________ Title___________________________
Date_______________________ Date____________________________
<PAGE>
EXHIBIT 6.0
6.0(a) Subcontracts and Other Third Party Commitments
Baxter Somatix
- ------ -------
None None
6.0(b) Written Termination
Baxter Somatix
- ------ -------
Termination letter dated August 9, 1995 Termination letter dated
for Research Funding Agreement August 9, 1995 for
Dr. Reinder Bolhuis/Bion Foundation Research Funding Agreement
and Daniel den Hoed Cancer Center Dr. Reinder Bolhuis/Bion
Foundation and Daniel
den Hoed Cancer Center
<PAGE>
EXHIBIT 7.0
Baxter equipment to be purchased by Somatix
Roll-in Incubator @ Somatix $4,646.07
Roll-in Incubator @ Somatix $4,646.07
Scierra Roller Base and Deck @ Somatix $4,012.58
Scierra Roller Base and Deck @ Somatix $4,012.58
Mini Fluorometer S/N 94-1157 @ Somatix $2,269.37
Oxygen Management System S/N 1024 @ Somatix $9,255.47
Oxygen Management System @ Somatix $9,255.47
Cell Cube Oxygenator @ Somatix $12,549.51
Cell Cube Oxygenator @ Somatix $12,549.51
CC Circ Pump S/N 0052 @ Somatix $4,140.65
CC Circ Pump S/N 0053 @ Somatix $4,140.65
CC Media Pump S/N 0054 @ Somatix $4,654.82
CC Media Pump S/N 0055 @ Somatix $4,654.82
Secondary Oxygen Probe S/N 1190 @ Somatix $2,738.82
Secondary Oxygen Probe @ Somatix $2,738.82
Cradle for Single 3112 S/N 1211 @ Somatix $1,285.48
Cradle for Single 3112 S/N 1211 @ Somatix $1,285.48
----------
TOTAL $88,836.17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Somatix Therapy Corporaton Form 10-Q for
the quarter ended December 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
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<NAME> SOMATIX THERAPY CORPORATION
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<S> <C>
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
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