<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________to___________________
Commission file number 0-14758
SOMATIX THERAPY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2762045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 MARINA VILLAGE PARKWAY, ALAMEDA, CALIFORNIA 94501
(Address of principal executive offices and zip code)
(510) 748-3000
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check [X] whether the registrant (1) has filed all
reports required to be filed by Sections 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, 1996
----- --------------------------------
Common Stock, $0.01 Par Value 24,476,848
Preferred Stock, $0.01 Par Value 280,984
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TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Consolidated Balance Sheets as of
December 31, 1996 and June 30, 1996............................. 1, 2
Consolidated Statements of Operations
for the Three and Six Months Ended
December 31, 1996 and 1995...................................... 3
Consolidated Statements of Cash Flows
for the Three and Six Months Ended
December 31, 1996 and 1995...................................... 4
Notes to Consolidated Financial Statements...................... 5
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations...................................................... 7
Risk Factors.................................................... 9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................... 17
ITEM 2. Changes in Securities........................................... 17
ITEM 3. Defaults upon Senior Securities................................. 17
ITEM 4. Submission of Matters to a Vote of
Security Holders................................................ 17
ITEM 5. Other Information............................................... 17
ITEM 6. Exhibits and Reports on Form 8-K................................ 18
Signatures...................................................... 19
</TABLE>
i.
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PART I. FINANCIAL INFORMATION.
ITEM 1. Financial Statements
SOMATIX THERAPY CORPORATION
---------
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
(unaudited)
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents .................... $ 5,786,000 $ 6,703,000
Marketable securities ........................ 3,905,000 7,738,000
Other current assets ......................... 998,000 889,000
----------- -----------
Total current assets ................... 10,689,000 15,330,000
Marketable Securities ............................ 0 595,000
Restricted cash .................................. 300,000 650,000
Equipment and improvements, at cost:
Laboratory and production equipment .......... 4,173,000 4,136,000
Equipment under capital leases ............... 3,737,000 3,435,000
Furniture and office equipment ............... 1,136,000 1,266,000
Leasehold improvements ....................... 4,465,000 4,286,000
----------- -----------
13,511,000 13,123,000
Less accumulated depreciation and amortization 11,495,000 10,459,000
----------- -----------
Net equipment and improvements ............... 2,016,000 2,664,000
----------- -----------
Other assets ..................................... 513,000 131,000
----------- -----------
$13,518,000 $19,370,000
=========== ===========
</TABLE>
See accompanying notes.
1.
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SOMATIX THERAPY CORPORATION
---------
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
(unaudited)
------------- -------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities .... $ 2,095,000 $ 2,237,000
Accrued compensation and related expenses ... 801,000 1,169,000
Capital lease obligations ................... 983,000 861,000
Accrued restructuring costs ................. 1,096,000 414,000
Other current liabilities ................... 239,000 186,000
------------- -------------
Total current liabilities ............... 5,214,000 4,867,000
Capital lease obligations, net of current portion, 992,000 1,217,000
Accrued restructuring costs,
net of current portion ...................... 634,000 834,000
Other liabilities ................................ 78,000 249,000
Stockholders' equity
Preferred stock, par value $0.01
per share, 1,000,000 shares authorized;
Series A, 247,651 shares, issued and
outstanding (239,811 at June 30, 1996);
Series B, 33,333 shares, issued and
outstanding (none at June 30, 1996) ........... 3,000 2,000
Common stock, par value $0.01 per share,
40,000,000 shares authorized,
24,476,848 issued and outstanding
(24,369,403 at June 30, 1996) ............... 245,000 244,000
Additional paid-in capital ..................... 187,401,000 182,118,000
Accumulated deficit ............................ (181,049,000) (170,161,000)
------------- -------------
Total stockholders' equity ................ 6,600,000 12,203,000
------------- -------------
$ 13,518,000 $ 19,370,000
============= =============
</TABLE>
See accompanying notes.
2.
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SOMATIX THERAPY CORPORATION
---------
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Research Agreement ........... $ -- $ -- $ -- $ --
Costs and expenses:
Research and development ..... 3,582,000 4,244,000 7,639,000 8,131,000
General and administrative ... 1,337,000 1,063,000 2,703,000 1,970,000
Restructuring costs .......... -- -- 1,060,000 --
------------ ------------ ------------ ------------
Total costs and expenses 4,919,000 5,307,000 11,402,000 10,101,000
------------ ------------ ------------ ------------
Operating loss ..................... (4,919,000) (5,307,000) (11,402,000) (10,101,000)
Other income, net .................. 209,000 203,000 515,000 421,000
------------ ------------ ------------ ------------
Net loss ............... $ (4,710,000) $ (5,104,000) $(10,887,000) $ (9,680,000)
============ ============ ============ ============
Net loss per share ................. $ (0.19) $ (0.22) $ (0.45) $ (0.43)
============ ============ ============ ============
Shares used in calculation of
net loss per share ........... 24,428,977 22,744,967 24,402,640 22,282,529
</TABLE>
See accompanying notes.
3.
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SOMATIX THERAPY CORPORATION
---------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended December 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................ $(10,887,000) $ (9,680,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization ....... 1,036,000 931,000
Increase in
other current assets .............. (109,000) (60,000)
Increase in other assets ............ (382,000) (25,000)
Decrease in accounts payable
and accrued liabilities ........... (143,000) (695,000)
Decrease in accrued compensation
and related expenses .............. (368,000) (166,000)
Increase (decrease) in accrued
restructuring cost ................ 482,000 (704,000)
Decrease in other
liabilities ....................... (118,000) (64,000)
------------ ------------
Net cash used in operating
activities ....................... (10,489,000) (10,463,000)
Cash flows from investing activities:
Maturities of marketable securities .. 4,440,000 1,700,000
Purchase of marketable securities .... (12,000) (13,120,000)
Decrease (increase) in restricted cash 350,000 (350,000)
Purchase of equipment and
improvements ........................ (388,000) (246,000)
------------ ------------
Net cash provided by (used in)
investing activities ............ 4,390,000 (12,016,000)
Cash flows from financing activities:
Borrowings under sale/leaseback
agreement ........................... 398,000 179,000
Principal payments under capital
lease obligations ................... (501,000) (394,000)
Net proceeds from issuance of
common stock ........................ 5,285,000 11,550,000
------------ ------------
Net cash provided by
financing activities ............ 5,182,000 11,335,000
Net increase (decrease) in cash ......... (917,000) (11,144,000)
Cash and cash equivalents,
beginning of period .................. 6,703,000 14,326,000
------------ ------------
Cash and cash equivalents,
end of period ........................ $ 5,786,000 $ 3,182,000
============ ============
Cash paid for interest .................. $ 139,000 $ 162,000
</TABLE>
See accompanying notes.
4.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation.
The information at December 31, 1996 and 1995, 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, 1996.
2. Reclassifications
Certain prior period balances have been reclassified to conform to
current year presentation.
3. Per Share Information
Per share information is based on the weighted average number of shares
of common stock outstanding during each period. Series A Preferred shares
convertible into 6.25 shares of common stock for each share of Series A
Preferred, Series B Preferred shares convertible into common stock on basis of
weighted average price of common stock at time of conversion (see Note 4 below)
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 month
periods ended December 31, 1996 and 1995, since their inclusion would be
anti-dilutive.
4. Equity Investment
On September 25, 1996 the Company sold 33,333 shares of convertible
Series B-1 preferred stock ("Preferred Stock") in a private placement pursuant
to Regulation S under the Securities Act of 1933, as amended, for an aggregate
consideration of $5,000,000 in cash. In addition, the Company has the right to
sell up to $10,000,000 in additional shares of Preferred Stock during the three
(3) year period ending September 25, 1999. No more than $5,000,000 may be sold
during any given six month period. The Preferred Stock is not entitled to
dividends and is convertible into common stock at a premium over an average of
the market price of the Company's Common Stock on the earlier of (i) the
investor's option, (ii) immediately following any sixty (60) day trading period
after March 1997 in which the Company's common stock has traded above 130% of
the closing price of the common stock on September 24, 1996, or (iii) September
25, 1999. The Company also issued to the investor a warrant to purchase 650,000
shares of the Company's common stock at a price equal to 130% of the closing
price of the Company's common stock on September 24, 1996. Such warrant is
exercisable between March 1998 and September 2002.
5. Restructuring Costs
On September 24, 1996, the Company implemented a cost reduction
program, delaying a Phase III clinical trial for its Autologus GVAXTM Cancer
Vaccine and significantly reduced the clinical development staff. Accordingly,
the Company recorded restructuring costs of $ 1,060,000 in the first quarter of
fiscal 1997, which included employee severance costs for 25 employees totaling
$853,000. Severance costs totaling $405,000 were paid through December 31, 1996.
5.
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6. Subsequent Events
The Company entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with Cell Genesys, Inc. and S Merger
Corp. (a wholly-owned subsidiary of Cell Genesys) dated as of January 12, 1997.
Pursuant to the Merger Agreement, S Merger Corp. will be merged with and into
the Company such that the Company will become a wholly-owned subsidiary of Cell
Genesys and the Company's stockholders shall become stockholders of Cell
Genesys. The pendency of the merger may have a material and adverse effect on
the Company's liquidity and capital resources in the event the merger is, for
any reason, not consummated. See "Risk Factors-Completion of Merger."
Subsequent to December 31, 1996, the Company incurred approximately $2
million in cash expenditures relating to restructuring costs from its September
1996 reduction in force and certain other expenses, which expenditures may have
an adverse effect upon the Company's liquidity. See -- Note 5 to Notes to
Consolidated Financial Statements.
6.
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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, 1996 or in the same period in the prior fiscal year.
Research and development expenses for the three and six month periods
ended December 31, 1996 decreased by $662,000 and $492,000 respectively, from
the same periods in the prior fiscal year. The decrease is due to the Company's
restructuring and cost savings program.
General and administrative expenses for the three-month period ending
December 31, 1996 increased by $274,000 from the same period in the prior fiscal
year. The increase is due to higher legal and other corporate costs, associated
with intensive corporate negotiations.
Other income consists principally of interest income earned on the
Company's cash reserves. The increase, to $515,000 in the six months of fiscal
year 1997, from $421,000 for the same period in fiscal year 1996, was primarily
due to sublease rental income received.
Liquidity And Capital Resources
On December 31, 1996, the Company had cash, cash equivalents, and
marketable securities of $9,691,000, compared with $15,036,000 on June 30,
1996. On December 31, 1996, the Company had working capital of $5,475,000
compared with $10,463,000 on June 30, 1996. In the six months ended December
31, 1996 the Company's operating cash and investments outflow was $6,202,000,
and the Company generated $5,285,000 from equity transactions. See -- Note 4 to
Notes to Consolidated Financial Statements. Operating expenses have exceeded
revenues for a number of years. For the six-month period ended December 31,
1996, capital expenditures amounted to $388,000. The Company has no material
capital commitments. Absent the consummation of the merger described under the
heading "Subsequent Events" below, the Company will need to either
substantially reduce its expenses and/or obtain substantial additional
financing immediately after any termination of the proposed merger in order to
finance its on-going operations. The Company has the right, under the private
placement dated September 25, 1996, to put certain shares of its Common Stock
to a non-U.S. investor for up to $5 million in proceeds after March 1997;
however, the number of shares to be put and the actual amount of this
additional financing will be determined by many factors, including the price of
the Company's stock (which, at the merger price, would limit such proceeds to
approximately $4 million), most of which are beyond the control of the Company.
(See Note 4 to Notes to Consolidated Financial Statements.) Other sources of
capital may be pursued by the Company depending upon the progression of the
merger and stockholder approval thereof. See "Risk Factors -- Future Capital
Needs; Uncertainty of Additional Funding."
If the Company's cash, cash equivalents and marketable securities
drops to less than $5,000,000, holders of the Company's Series A Preferred
Stock have the right, as a class, to remove and replace a majority of the
Company's Board of Directors. Unless the Company raises additional financing in
the third quarter of fiscal 1997, this condition may be triggered either late
in the third quarter or early in the fourth quarter.
7.
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Subsequent Events
The Company entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with Cell Genesys, Inc. and S Merger
Corp. (a wholly-owned subsidiary of Cell Genesys) dated as of January 12, 1997.
Pursuant to the Merger Agreement, S Merger Corp. will be merged with and into
the Company such that the Company will become a wholly-owned subsidiary of Cell
Genesys and the Company's stockholders shall become stockholders of Cell
Genesys. The pendency of the Merger may have a material and adverse effect on
the Company's liquidity and capital resources in the event the Merger is, for
any reason, not consummated. See "Risk Factors-Completion of Merger."
Subsequent to December 31, 1996, the Company incurred approximately $2
million in cash expenditures relating to restructuring costs from its September
1996 reduction in force and certain other expenses, which expenditures may have
an adverse effect upon the Company's liquidity. See -- Note 5 to Notes to
Consolidated Financial Statements.
This Form 10-Q contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward- looking statements. Factors that could cause or contribute to such
differences include those discussed in "Risk Factors" as well as those discussed
elsewhere in this Form 10-Q.
8.
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RISK FACTORS
COMPLETION OF MERGER
The Company has entered into an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with Cell Genesys, Inc. and S Merger
Corp. (a wholly-owned subsidiary of Cell Genesys) dated as of January 12, 1997.
Pursuant to the Merger Agreement, the Company has agreed to certain covenants
regarding the operation of its business pending stockholder approval of the
Merger, which covenants prohibit the sale or other transfer of Company
intellectual property or other assets and limit the amount and types of
financing the Company may obtain during the pendency of the Merger. Although the
Company believes that it has sufficient access to capital to fund its operations
through the consummation of the Merger or any termination of the Merger
Agreement, such covenants limit the Company's flexibility in raising further
capital and would therefore materially and adversely affect the Company's
operations if the Merger is not consummated. The Merger Agreement also requires
the Company, under certain limited circumstances, to pay a $3 million breakup
fee to Cell Genesys if the Merger Agreement is terminated. Such a payment would
severely and adversely affect the Company's liquidity and its ability to fund
its operations.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company's future capital requirements will depend on many factors,
including the progress of the Company's research and development, the scope and
results of preclinical studies and clinical trials, the cost of obtaining
regulatory approvals, the rate of technological advances, determinations as to
the commercial potential of the Company's products under development, the status
of competitive products and the establishment of manufacturing capacity. The
Company anticipates that it will be required to raise substantial additional
funds, including funds raised through collaborative relationships and public or
private financings. Because of the Company's significant long-term capital
requirements, it may seek to access the public equity markets whenever
conditions are favorable, even if it does not have an immediate need for
additional capital at that time. No assurance can be given that additional
financing will be available on acceptable terms, or at all. If adequate funds
are not available, the Company will be required to curtail significantly its
research and development programs or may be required to discontinue its programs
in their entirety and liquidate its assets. See Item 2 "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
EARLY STAGE OF DEVELOPMENT; NO DEVELOPED OR APPROVED PRODUCTS
Somatix' potential gene therapy products are in research and
development. No revenues have been generated from the sale of any of such
products, nor are any such revenues expected for at least the next several
years. The products currently under development by the Company will require
significant additional research and development efforts, including extensive
preclinical and clinical testing and regulatory approval, prior to commercial
use. There can be no assurance that the Company's research and development
efforts will be successful, that any of the Company's potential gene therapy
products will prove to be safe and effective in clinical trials or that any
commercially successful products will ultimately be developed by the Company.
Even if developed, these products may not receive regulatory approval or be
successfully introduced and marketed at prices that would permit the Company to
operate profitably.
TECHNOLOGICAL UNCERTAINTY
Gene therapy is a new technology, and existing preclinical and clinical
data on the safety and efficacy of gene therapy are very limited. Data relating
to the Company's specific gene therapy approaches are even more limited.
Somatix' GVAXTM cancer vaccine is being tested in Phase I/II human clinical
trials primarily to determine its safety. The Company has completed a Phase I
clinical trial in the treatment of chronic granulomatous disease ("CGD") using
hematopoietic stem cells in a clinical trial, in conjunction with laboratories
at the National Institutes
9.
<PAGE> 12
of Health. Possible serious side effects of gene therapy include viral
infections, the initiation of cancers and possible autoimmune diseases in the
patient. There can be no assurance that unacceptable side effects will not be
discovered during preclinical and clinical testing of the Company's potential
products or thereafter. There are many reasons that potential products that
appear promising at an early stage of research or development do not result in
commercialization. There can be no assurance that the Company will be permitted
to undertake human clinical trials for any of its other products or that the
results of such testing will demonstrate safety or efficacy. Even if clinical
trials are successful, there is no assurance that the Company will obtain
regulatory approval for any indication, or that an approved product can be
produced in commercial quantities at reasonable costs, or be successfully
marketed. The Company has also recently begun development of in vivo approaches
to gene therapy, some of which will target specific cells. There can be no
assurance that the desired specificity will be attained or that such products
will not have serious side effects.
OPERATING LOSS AND ACCUMULATED DEFICIT
The Company has incurred net losses since its inception. At December
31, 1996, the Company's accumulated deficit was approximately $181.0 million.
Such losses have resulted principally from expenses incurred in the Company's
research and development programs, the acquisition of new technology, and to a
lesser extent, from general and administrative expenses. The Company incurred a
loss of $20.7 million in fiscal 1996 and expects to incur substantial and
increasing losses for at least the next several years due primarily to the
expansion of its research and development programs, including preclinical
studies, clinical trials and manufacturing. The Company expects that losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial.
There can be no assurance that the Company will successfully develop,
commercialize, manufacture or market its products or ever achieve or sustain
product revenues or profitability.
PATENTS AND TRADE SECRETS
The patent positions of pharmaceutical and biotechnology firms,
including Somatix, are generally uncertain and involve complex legal and factual
questions. While Somatix is actively prosecuting its patent applications, it
does not know whether any given application will result in the issuance of a
patent or, if any patent is issued, whether it will provide significant
proprietary protection or will be invalidated. Because patent applications in
the United States are confidential until patents issue and publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries by several months, Somatix can not be certain it was the first
creator of inventions covered by pending patent applications or that it was the
first to file patent applications for such inventions.
The commercial success of Somatix will also depend in part on not
infringing the patents or proprietary rights of others and not breaching
licenses granted to Somatix. Somatix may be required to obtain licenses to third
party technology necessary to conduct its business. Any failure by Somatix to
license at reasonable cost any technology required to commercialize its
technologies or products may have an adverse impact on Somatix.
Litigation, which could result in substantial cost to Somatix, may also
be necessary to enforce any patents issued to Somatix, or to determine the scope
and validity of other parties' proprietary rights. To determine the priority of
inventions, interference proceedings are frequently declared by the United
States Patent Office that could result in substantial costs to Somatix and may
result in an adverse decision as to the patentability of Somatix' inventions.
Somatix is currently involved in an interference proceeding and may be involved
in others in the future. Somatix believes that there will continue to be
significant litigation in the industry regarding patent and other intellectual
property rights. See "-Legal Proceedings."
For example, one of Somatix competitors has been granted an exclusive
license to a United States patent recently issued to the National Institutes of
Health, covering ex vivo gene therapy. The United States Patent and Trademark
Office recently declared an interference between the competitor's patent, a
patent application exclusively
10.
<PAGE> 13
licensed to Somatix, and a patent application of a third party. Somatix has been
accorded Senior Party status, because the application licensed to Somatix has a
priority date earlier than that of either the patent issued to the National
Institutes of Health or the patent application of the third party. The
interference proceeding is in its early stages. It is expected that the
proceedings may last for several years. While Somatix believes it has a strong
position, nothing can be predicted about the outcome of the proceedings, and the
Company believes that an adverse result could have a material adverse effect on
Somatix' intellectual property portfolio or its business.
Somatix also relies on unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position. No assurance can be given that others will
not independently develop substantially equivalent proprietary information and
techniques, or otherwise gain access to Somatix' trade secrets or disclose such
technology, or that Somatix can meaningfully protect its rights to its
unpatented trade secrets.
Somatix requires its employees and consultants to execute a
confidentiality agreement upon the commencement of an employment or consulting
relationship with it. These agreements provide that all confidential information
developed by or made known to an individual during the course of the employment
or consulting relationship generally must be kept confidential. In the case of
employees, the agreements provide that all inventions conceived by the
individual while employed by Somatix, relating to its business, are the
exclusive property of Somatix. These agreements may not provide meaningful
protection for Somatix' trade secrets in the event of unauthorized use or
disclosure of such information.
A number of the DNA sequences which the Company expects to use in its
gene therapy products are or may become patented by third parties. As a result,
the Company may be required to obtain licenses under such patents in order to
conduct certain research, to manufacture or to market products that contain
proprietary genes. There can be no assurance that such licenses will be
available on commercially reasonable terms, if at all. The Company is aware of
proceedings to determine rights to the human GM-CSF cDNA sequence in the United
States and Europe. In the United States, in the most recent public disclosure of
which the Company is aware, the Board of Patent Appeals and Interferences
granted a motion by a third party in an interference proceeding stating that the
human GM-CSF cDNA sequence is not patentable over the prior art. In Europe, an
Opposition proceeding initiated by a third party to invalidate a European patent
covering human GM-CSF cDNA was unsuccessful. The decision by the European Patent
Office Opposition Division upholding the patent has been appealed by this third
party. There can be no assurance of the outcome of these proceedings or the
outcome of these proceedings on appeal, or that, if required, a license of
rights to the gene sequence will be available to the Company on commercially
reasonable terms, if at all.
The Company has acquired significant proprietary rights under license
agreements that permit the licensors to terminate those agreements in the event
of certain material breaches by the Company. Although the Company is not
currently in default under any of these agreements, there can be no assurance
that such defaults will not occur in the future. Should a default occur, and
should any of those agreements be terminated in the future, the Company could
lose the right to continue to develop one or more of these potential products.
COMPETITION
Competition in the field of gene therapy from other biotechnology and
pharmaceutical companies and from research and academic institutions is intense
an expected to increase. There are numerous competitors working on products to
treat each of the diseases for which Somatix is seeking to develop therapeutic
products. Some competitors are pursuing a product development strategy
competitive with Somatix. Certain of these competitive products are in
substantially more advanced stages of product development and clinical trials.
Somatix' competitors may develop technologies and products that are more
effective than those being developed by Somatix or that would render Somatix'
technology and products less competitive or obsolete. Many of these competitors
have substantially greater financial resources and larger research and
development staffs than Somatix has. In addition, many of these
11.
<PAGE> 14
competitors may have significantly greater experience than Somatix in developing
products, in undertaking preclinical testing and human clinical trials of new
pharmaceutical products, in obtaining United States Food and Drug Administration
(the "FDA") and other regulatory approvals of products, and in manufacturing and
marketing such products. Accordingly, Somatix' competitors may succeed in
obtaining patent protection, receiving FDA approval or commercializing products
more rapidly than the Company. There can be no assurance that the Company will
be able to obtain certain biological materials necessary to support its
research, development or manufacturing of any of the Company's planned
therapies. If Somatix is permitted to commence commercial sales of products, it
will also be competing with respect to marketing capabilities and manufacturing
efficiency, areas in which it has limited or no experience. It is anticipated
that Somatix will build additional clinical scale and commercial sale
manufacturing facilities to the extent that contract facilities are not
available in order to commercialize its products. It is also anticipated that
the Company will secure funding for these and other product development
activities through its partners and future potential partners. Somatix also
competes with universities and other research institutions in the development of
products, technologies and processes. In many instances, Somatix compete with
other commercial entities in acquiring products or technology from universities.
Somatix expects that competition among products approved for sale will
be based, among other things, on product efficacy, safety, reliability,
availability, price, patent position, and sales, marketing and distribution
capabilities. Somatix' competitive position also depends upon its ability to
attract and retain qualified personnel, obtain patent protection and otherwise
develop proprietary products or processes and secure sufficient capital
resources for the often substantial period between product conception and
commercial sales.
The levels of revenues and profitability of biotechnology and
pharmaceutical companies such as the Company may be affected by the continuing
efforts of governmental and third party payors to contain or reduce the costs of
health care through various means. In the United States there have been, and
Somatix expects that there will continue to be, a number of federal and state
proposals to control health care costs. Somatix can not predict the effect
health care reforms may have on its business, and no assurance can be given that
any such reforms will not have a material adverse effect on Somatix. In the
United States and elsewhere, sales of therapeutic products are dependent in part
on the availability of reimbursement to the consumer from third party payors,
such as government and private insurance plans. If Somatix succeeds in bringing
one or more products to the market, there can be no assurance that these
products will be considered cost effective and that reimbursement to the
consumer will be available or will be sufficient to allow or the Company to sell
its products on a competitive basis.
VOLATILITY OF STOCK PRICE
The market prices for securities of biopharmaceutical and biotechnology
companies (including the Company) have historically been highly volatile, and
the market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products by the
Company or its competitors, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by the Company or others and general market conditions may have a significant
effect on the market price of the Common Stock.
DEPENDENCE UPON KEY PERSONNEL AND COLLABORATIVE RELATIONSHIPS
The Company's success is highly dependent on the retention of principal
members of its management and scientific staff and the recruitment of additional
qualified personnel. The loss of key personnel or the failure to recruit
necessary additional qualified personnel could have an adverse effect on the
operations of the Company. There is intense competition from other companies,
research and academic institutions and other organizations for qualified
personnel in the areas of the Company's activities. There is no assurance that
Somatix will be able to continue to attract and retain the qualified personnel
necessary for the development of its business. These activities are expected to
require the addition of new personnel with expertise in the areas of clinical
testing, manufacturing,
12.
<PAGE> 15
marketing and distribution and the development of additional expertise by
existing personnel. The failure to acquire such personnel or develop such
expertise could adversely affect prospects for the Company's success.
The Company has clinical trial arrangements with The Johns Hopkins
University covering a Phase I clinical trial to treat kidney cancer patients,
completed as of May 1995, and a Phase I/II clinical trial to treat prostate
cancer patients which is ongoing. The Company has additional arrangements with
the Netherlands Cancer Institute and the Dana Farber Cancer Center to treat
melanoma patients in two separate Phase I clinical trials. Both trials are
currently in progress. The Company has also completed a Phase I clinical trial
in the treatment of chronic granulomatous disease ("CGD") using hematopoietic
stem cells in a clinical trial, in conjunction with laboratories at the National
Institutes of Health. In the event that any of these relationships are
terminated, the completion and evaluation of clinical trials could be adversely
affected. In addition, the Company has an arrangement with the Parkinson's
Institute of Santa Clara, California to provide animal facilities, animals and
consulting services in connection with preclinical testing of its gene therapy
product for Parkinson's Disease. If the relationship were terminated, progress
of preclinical testing might be adversely affected.
The Company depends in part on the continued availability of outside
scientific collaborators performing research, which may be funded by the
Company, in certain areas relevant to the Company's research. These
relationships generally may be terminated at any time by the collaborator,
typically by giving 30 days' notice to the Company. The Company's scientific
collaborators are not employees of the Company. As a result, the Company has
limited control over their activities and can expect that only limited amounts
of their time will be dedicated to Company activities. The Company's agreements
with these collaborators as well as those with the Company's scientific
consultants provide that any rights the Company obtains as a result of the
research efforts of these individuals will be subject to the rights of the
research institutions in such work. In addition, some of these collaborators
have consulting or other advisory arrangements with other entities that may
conflict with their obligations to the Company. For these reasons, there can be
no assurance that inventions or processes discovered by the Company's scientific
collaborators or scientific consultants will become the property of the Company.
COMMERCIALIZATION: LACK OF MANUFACTURING OR MARKETING EXPERIENCE
The Company intends to market and sell some of its potential products
directly, while relying on sales and marketing expertise of potential corporate
partners for other programs. The Company has no experience in sales, marketing
or distribution of biopharmaceutical products and has not developed a specific
sales and marketing plan with respect to any of its potential products. The
decision to market products directly or through corporate partners will be based
on a number of factors including market size and concentration, the size and
expertise of the partner's sales force in a particular market and the Company's
overall strategic objectives. The Company is currently engaged in various stages
of discussions with potential partners. There can be no assurance that the
Company will be able to establish such relationships on acceptable terms and
conditions, or at all.
The Company's current commercialization strategy is to sell genetically
modified cells to hospitals and clinics. The Company will be required to operate
facilities in which each patient's cells are genetically modified, processed and
tested in compliance with the Good Manufacturing Practices published in the U.S.
Code of Federal Regulations. Currently, the Company can manufacture genetically
modified cells in quantities sufficient to meet its needs for clinical testing
but does not have the capability to manufacture sufficient quantities to meet
large-scale commercial requirements. The Company believes that its processes can
be scaled-up efficiently to meet its anticipated future requirements, but there
can be no assurance that problems or delays will not arise in such scale- up.
The manufacture of sufficient quantities of the Company's potential products can
be an expensive, time-consuming and complex process. If the Company is unable to
develop such manufacturing capabilities, the Company's ability to commercialize
its products will be adversely affected. This could prevent or delay submission
of products for regulatory approval and initiation of new development programs,
which would have a material adverse effect on the Company.
13.
<PAGE> 16
GOVERNMENT REGULATION
The Company's business is subject to regulation under state and federal
laws regarding environmental protection and hazardous substances control. The
Company believes that its efforts to comply with these laws have had no adverse
impact upon its capital expenditures, results of operations or competitive
position, but there can be no assurance that this situation will continue.
Federal and state agencies and congressional committees have expressed interest
in further regulation of biotechnology. The Company is unable to estimate the
extent and impact of regulation in the biotechnology field resulting from any
future federal, state or local legislation or administrative action.
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of Somatix'
proposed products and its research and development activities. All of Somatix'
products will require regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products must undergo
rigorous preclinical and clinical testing and other premarket approval
procedures by the FDA and similar authorities in foreign countries Since certain
of Somatix' potential products involve the application of new technologies,
regulatory approvals may take longer than for products produced using more
conventional methods. Various federal and, in some cases, state statutes and
regulations also govern or influence the manufacturing, safety, labeling,
storage, record keeping and marketing of such products. The lengthy process of
seeking these approvals, and the subsequent compliance with applicable federal
statutes and regulations, requires the expenditure of substantial resources. Any
failure by Somatix or its collaborators or licensees to obtain, or any delay in
obtaining, regulatory approvals could adversely affect the marketing of any
products developed by the Company and its ability to receive product or royalty
revenue.
The activities required before a pharmaceutical agent may be marketed
in the United States begin with preclinical testing. Preclinical tests include
laboratory evaluation of potential products and animal studies to assess the
potential safety and efficacy of the product and its formulations. The results
of these studies and other information must be submitted to the FDA as part of
an investigational new drug application, which must be reviewed and approved by
the FDA before proposed clinical testing can begin. Clinical trials involve the
administration of the investigational new drug to healthy volunteers or to
patients under the supervision of a qualified principal investigator. Clinical
trials are conducted in accordance with Good Clinical Practices under protocols
that detail the objectives of the study, the parameters to be used to monitor
safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the investigational new drug application.
Further, each clinical study must be conducted under the auspices of an
independent institutional review board at the institution at which the study
will be conducted. The institutional review board will consider, among other
things, ethical factors and the safety of human subjects. In addition, certain
protocols involving the use of genetically modified human cells must also be
reviewed by the Recombinant Advisory Committee of the National Institutes of
Health.
Typically, clinical testing involves a three-phase process. In Phase I,
clinical trials are conducted with a small number of subjects to determine the
early safety profile and pharmacology of the new therapy. Although the
preliminary Phase I clinical testing results reported to date of Somatix'
GVAX(TM) cancer vaccine product have shown no treatment-related safety problems,
there can be no assurance that such therapy or product will be tolerated at
higher doses or that the clinical efficacy of such therapy or product will be
demonstrated. In Phase II, clinical trials are conducted with groups of patients
afflicted with a specific disease in order to determine preliminary efficacy,
optimal dosages and expanded evidence of safety. In Phase III, large scale,
multicenter, comparative clinical trials are conducted with patients afflicted
with a target disease in order to provide enough data for the statistical proof
of efficacy and safety required by the FDA and others. In the case of products
for life-threatening diseases, the initial human testing is generally done with
diseased patients rather than with healthy volunteers. Since these patients are
already afflicted with the target disease, it is possible that such studies may
provide results traditionally obtained in Phase II trials. These trials are
frequently referred to as Phase I/II trials.
14.
<PAGE> 17
The results of the preclinical and clinical testing, together with
chemistry and manufacturing information, are submitted to the FDA in the form of
a new drug application for a pharmaceutical product, and in the form of a
product license application for a biological product, for approval to commence
commercial sales. In responding to a new drug application or a product license
application, the FDA may grant marketing approvals, request additional
information or further research, or deny the application if it determines that
the application does not satisfy its regulatory approval criteria. Approvals may
not be granted on a timely basis, if at all, or if granted may not cover all the
clinical indications for which Cell Genesys, Somatix or the Combined Company is
seeking approval or may contain significant limitations in the form of warnings,
precautions or contraindications with respect to conditions of use.
In addition to laws and regulations enforced by the FDA, Somatix is and
will be, 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 and other present and potential future federal,
state or local laws and regulations. Somatix' research and development involves
the controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds. Although Somatix believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed by
state and federal regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, Somatix could be held liable for any damages that result and any such
liability could exceed the resources of Somatix.
Somatix manufacturing facility for production of clinical quantities of
its products was licensed in 1993 by the California Department of Health
Services. The California Department of Health Services may inspect the facility
annually. Manufacture of clinical quantities of Somatix products does not
require an FDA license, although the FDA may at any time inspect the facility.
The continued operation of this facility requires compliance with FDA standards
for this type of manufacturing. A separate license from the FDA is required for
commercial manufacturing of any products. During 1995 and 1996, Somatix
completed construction of its clinical scale cell processing facility. The
facility was expanded in anticipation of a large efficacy trial of the GVAX(TM)
cancer vaccine.
For marketing outside the United States, Somatix is and will be,
subject to foreign regulatory requirements governing human clinical trials and
marketing approval for drugs and devices. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly
from country to country.
PRODUCT LIABILITY AND INSURANCE
Clinical trials or marketing of any of the Company's potential products
may expose the Company to liability claims resulting from the use of such
products. These claims might be made directly by consumers, health care
providers or by others selling such products. The Company currently maintains
product liability insurance with respect to its former product lines and this
coverage includes clinical trials. The policy coverage is $5 million and is on a
claims made basis. There can be no assurance that the Company will be able to
maintain such insurance or, if maintained, that sufficient coverage can be
acquired at a reasonable cost. An inability to maintain insurance at acceptable
cost or at all could prevent or inhibit the clinical testing or
commercialization of products developed by the Company. A product liability
claim or recall could have a material adverse effect on the business or
financial condition of the Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development activities involve the
controlled use of hazardous materials, chemicals, viruses and various
radioactive compounds. The Company is subject to federal, state and local laws
and regulations governing the use, manufacture, storage, handling and disposal
of such materials and certain waste products. Although the Company believes that
its safety procedures for handling and disposing of such materials comply with
the standards prescribed by such laws and regulations, the risk of accidental
contamination or injury
15.
<PAGE> 18
from these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company. The Company may be
required to incur significant costs to comply with environmental laws and
regulations in the future. The Company's operations, business or assets may be
materially or adversely affected by current or future environmental laws or
regulations.
REIMBURSEMENT
In both domestic and foreign markets, sales of the Company's potential
products will depend in part upon coverage and reimbursement from third-party
payors, including health care organizations, including government agencies,
private health care insurers and other health care payors such as health
maintenance organizations, self-insured employee plans and the Blue Cross/Blue
Shield plans. There is considerable pressure to reduce the cost of drug
products. In particular, reimbursement from government agencies and insurers and
large health organizations may become more restricted in the future. The
Company's potential products represent a new mode of therapy, and, while the
cost-benefit ratio of the products may be favorable, the Company expects that
the costs associated with its products will be substantial. There can be no
assurance that the Company's proposed products, if successfully developed, will
be considered cost-effective by third party payors, that insurance coverage will
be available or, if available, that such payors' reimbursement policies will not
adversely affect the Company's ability to sell its products on a profitable
basis. In addition, there can be no assurance that insurance coverage will be
provided by such payors at all or without substantial delay, or, if such
coverage is provided, that the approved reimbursement will provide sufficient
funds to enable the Company to become profitable.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND RELATED MATTERS
The future revenues and profitability of and availability of capital
for biotechnology companies may be affected by the continuing efforts of
governmental and third party payors to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
prospects.
16.
<PAGE> 19
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 December 18, 1996, at the Company's 1996 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.; John T. Potts, Jr., M.D.; Thomas E. Shenk, Ph.D.;
Samuel D. Waksal, Ph.D.; Leon E. Rosenberg, M.D.; Inder M. Verma by the
stockholders to serve on the board of directors.
The results of the vote are as follows:
<TABLE>
<CAPTION>
Total Vote For Total Vote Withheld
Each Director from Each Director
------------- ------------------
<S> <C> <C>
David W. Carter 18,778,857 1,876,903
Karen Davis, Ph.D. 18,797,807 1,857,953
Michael R. Eisenson 18,790,857 1,864,903
Fred H. Gage, Ph.D. 18,799,357 1,856,403
John T. Potts, Jr., M.D. 18,792,907 1,862,853
Leon E. Rosenberg, M.D. 18,798,657 1,857,103
Thomas E. Shenk, Ph.D. 18,798,457 1,857,303
Inder M. Verma, Ph.D. 18,702,199 1,953,561
Samuel D. Waksal, Ph.D. 18,839,457 1,816,303
</TABLE>
B. The ratification of Ernst & Young, LLP as independent auditors of
the Company for fiscal year ending June 30, 1997.
The results are as follows:
<TABLE>
<CAPTION>
For Against Abstain No Vote
--- ------- ------- -------
<S> <C> <C> <C> <C>
20,606,132 34,962 14,666 0
</TABLE>
Item 5. Other Information. None.
17.
<PAGE> 20
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following documents are referenced or included in this
report:
Exhibit
No.
10.87 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and David W. Carter.
10.88 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Edward O. Lanphier II.
10.89 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Lawrence K. Cohen.
10.90 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Joseph A. Rokovich.
27 Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed in the
quarter ended December 31, 1996.
18.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed in its behalf
by the undersigned thereunto duly authorized.
SOMATIX THERAPY CORPORATION
DATED: February 10, 1997 By: /s/ DAVID W. CARTER
--------------------------------------
President, Chief Executive Officer and
Chairman of the Board
DATED: February 10, 1997 By: /s/ EDWARD O. LANPHIER II
---------------------------------------
Executive Vice President, Commercial
Development and Chief Financial Officer
(Principal Financial and Accounting
Officer)
19.
<PAGE> 22
Exhibit Index
Exhibit
No.
10.87 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and David W. Carter.
10.88 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Edward O. Lanphier II.
10.89 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Lawrence K. Cohen.
10.90 Addendum to Employment Agreement, dated November 18, 1996, by and
between the Company and Joseph A. Rokovich.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 10.87
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made by and between
Somatix Therapy Corporation (the "Company") and David W. Carter (the
"Employee") as of November 18, 1996.
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of July 1, 1993 (the "Employment Agreement");
WHEREAS, the Board of Directors of the Company has deemed it
in the best interests of the Company to provide its senior management with an
incentive to pursue transactions which could include a change-in-control of the
Company and which might not result in any immediate gain to such members of
senior management as a result of the options to acquire Company Common Stock
held by them;
WHEREAS, The Board of Directors has determined that it would
therefore be in the best interests of the Company to amend the Employment
Agreement and each option to acquire Common Stock held by the Employee to
provide that in the event of a Change-in-Control of the Company, the Employee
shall have a period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. For purposes of this Agreement, "Change-in-Control"
shall mean the merger, reorganization or sale of substantially all of the
assets of the Company or any other transaction in which the stockholder of the
Company immediately prior to such transaction own less than 51% of the voting
securities of the acquiring or surviving entity (or its parent) immediately
after the transaction.
2. The Employment Agreement and each option to acquire
Common Stock held by the Employee shall hereby be amended to provide that in
the event of a Change-in-Control of the Company, the Employee shall have a
period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
3. Except as herein amended or otherwise amended, the
Employment Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXECUTED THIS
AMENDMENT.
SOMATIX THERAPY CORPORATION
By /s/ MICHAEL R. EISENSON
-----------------------------------
/s/ DAVID W. CARTER
--------------------------------------
Employee
<PAGE> 1
EXHIBIT 10.88
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made by and between
Somatix Therapy Corporation (the "Company") and Edward O. Lanphier II (the
"Employee") as of November 18, 1996.
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of November 9, 1993 (the "Employment Agreement");
WHEREAS, the Board of Directors of the Company has deemed it
in the best interests of the Company to provide its senior management with an
incentive to pursue transactions which could include a change-in-control of the
Company and which might not result in any immediate gain to such members of
senior management as a result of the options to acquire Company Common Stock
held by them;
WHEREAS, The Board of Directors has determined that it would
therefore be in the best interests of the Company to amend the Employment
Agreement and each option to acquire Common Stock held by the Employee to
provide that in the event of a Change-in-Control of the Company, the Employee
shall have a period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. For purposes of this Agreement, "Change-in-Control"
shall mean the merger, reorganization or sale of substantially all of the
assets of the Company or any other transaction in which the stockholder of the
Company immediately prior to such transaction own less than 51% of the voting
securities of the acquiring or surviving entity (or its parent) immediately
after the transaction.
2. The Employment Agreement and each option to acquire
Common Stock held by the Employee shall hereby be amended to provide that in
the event of a Change-in-Control of the Company, the Employee shall have a
period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
3. Except as herein amended or otherwise amended, the
Employment Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXECUTED THIS
AMENDMENT.
SOMATIX THERAPY CORPORATION
By /s/ DAVID W. CARTER
----------------------------------
/s/ EDWARD O. LANPHIER II
--------------------------------------
Employee
<PAGE> 1
EXHIBIT 10.89
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made by and between
Somatix Therapy Corporation (the "Company") and Lawrence K. Cohen, Ph.D. (the
"Employee") as of November 18, 1996.
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of August 1, 1993 (the "Employment Agreement");
WHEREAS, the Board of Directors of the Company has deemed it
in the best interests of the Company to provide its senior management with an
incentive to pursue transactions which could include a change-in-control of the
Company and which might not result in any immediate gain to such members of
senior management as a result of the options to acquire Company Common Stock
held by them;
WHEREAS, The Board of Directors has determined that it would
therefore be in the best interests of the Company to amend the Employment
Agreement and each option to acquire Common Stock held by the Employee to
provide that in the event of a Change-in-Control of the Company, the Employee
shall have a period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. For purposes of this Agreement, "Change-in-Control"
shall mean the merger, reorganization or sale of substantially all of the
assets of the Company or any other transaction in which the stockholder of the
Company immediately prior to such transaction own less than 51% of the voting
securities of the acquiring or surviving entity (or its parent) immediately
after the transaction.
2. The Employment Agreement and each option to acquire
Common Stock held by the Employee shall hereby be amended to provide that in
the event of a Change-in-Control of the Company, the Employee shall have a
period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
3. Except as herein amended or otherwise amended, the
Employment Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXECUTED THIS
AMENDMENT.
SOMATIX THERAPY CORPORATION
By /s/ DAVID W. CARTER
-----------------------------------
/s/ LAWRENCE K. COHEN
--------------------------------------
Employee
<PAGE> 1
EXHIBIT 10.90
ADDENDUM TO EMPLOYMENT AGREEMENT
This Addendum to Employment Agreement is made by and between
Somatix Therapy Corporation (the "Company") and Joseph A. Rokovich, Ph.D. (the
"Employee") as of November 18, 1996.
WHEREAS, the Company and the Employee are parties to an
Employment Agreement dated as of October 3, 1996 (the "Employment Agreement");
WHEREAS, the Board of Directors of the Company has deemed it
in the best interests of the Company to provide its senior management with an
incentive to pursue transactions which could include a change-in-control of the
Company and which might not result in any immediate gain to such members of
senior management as a result of the options to acquire Company Common Stock
held by them;
WHEREAS, The Board of Directors has determined that it would
therefore be in the best interests of the Company to amend the Employment
Agreement and each option to acquire Common Stock held by the Employee to
provide that in the event of a Change-in-Control of the Company, the Employee
shall have a period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. For purposes of this Agreement, "Change-in-Control"
shall mean the merger, reorganization or sale of substantially all of the
assets of the Company or any other transaction in which the stockholder of the
Company immediately prior to such transaction own less than 51% of the voting
securities of the acquiring or surviving entity (or its parent) immediately
after the transaction.
2. The Employment Agreement and each option to acquire
Common Stock held by the Employee shall hereby be amended to provide that in
the event of a Change-in-Control of the Company, the Employee shall have a
period of three (3) years from the date of effectiveness of such
Change-in-Control to exercise any and all options to acquire Common Stock of
the Company held by Employee immediately preceding such Change-in-Control.
3. Except as herein amended or otherwise amended, the
Employment Agreement shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXECUTED THIS
AMENDMENT.
SOMATIX THERAPY CORPORATION
By /s/ DAVID W. CARTER
-----------------------------------
/s/ JOSEPH A. ROKOVICH
--------------------------------------
Employee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated balance sheets and unaudited consolidated statements of
operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> SEP-30-1996
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0
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