<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter ended June 30, 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 No. 0-18549
-------
GENSIA, INC.
----------------------------
(Exact name of registrant as
specified in its charter)
Delaware 33-0176647
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9360 Towne Centre Drive
San Diego, California 92121
-----------------------------------------------------
(Address of principal executive offices and zip code)
(619) 546-8300
----------------------------------------------------
(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, was 36,820,386 shares of common stock, par value $.01,outstanding at
June 30, 1996.
<PAGE> 2
GENSIA, INC.
INDEX
Page No.
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Balance Sheets at June 30, 1996 and 3
December 31, 1995
Consolidated Statements of Operations for the three 4
and six months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows for the six 5
months ended June 30, 1996 and 1995
Notes to the Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - for the three and six 8
months ended June 30, 1996 and 1995
Liquidity and Capital Resources 9
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 11
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 6: Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENSIA, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 23,907 $ 47,421
Short-term investments 22,156 11,440
Accounts receivable 5,800 9,615
Inventories 11,725 11,562
Other current assets 3,364 3,313
Notes receivable from officers and employees 554 547
---------- ----------
Total current assets 67,506 83,898
Property and equipment, net 28,886 25,749
Deposits and other assets 8,459 8,913
---------- ----------
$ 104,851 $ 118,560
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,114 $ 7,980
Accrued research and development costs 232 533
Accrued payroll and related expenses 2,825 2,356
Other accrued liabilities 3,506 4,962
Current portion of deferred revenue 1,771 --
Current maturities of long-term obligations 117 380
---------- ----------
Total current liabilities 17,565 16,211
Deferred revenue, less current portion 1,250 --
Long-term obligations, less current maturities 153 46
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, 1,600,000 issued and
outstanding at June 30, 1996 and
December 31, 1995, respectively 16 16
Common stock, $.01 par value, 75,000,000
shares authorized, 36,820,386 and
34,640,976 shares issued and
outstanding at June 30, 1996 and
December 31, 1995, respectively 368 346
Contingent value rights -- 2,875
Additional paid-in capital 328,844 319,502
Unrealized gain/(loss) on available-
for-sale securities (18) 1
Accumulated deficit (242,929) (219,337)
Unearned compensation (398) (1,100)
---------- ----------
Total stockholders' equity 85,883 102,303
---------- ----------
$ 104,851 $ 118,560
========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE> 4
GENSIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 12,785 $ 13,669 $ 25,679 $ 26,999
Contract research and license fees
(including $2,026 from affiliates for
the three months ended June 30, 1995
and $3,940 for the six months ended
June 30, 1995) 792 4,166 792 8,317
Interest income 578 479 1,290 967
---------- ---------- ---------- ----------
Total revenues 14,155 18,314 27,761 36,283
Costs and expenses:
Cost of sales 9,853 7,902 18,324 16,520
Research and development 8,762 10,463 16,959 20,037
Selling, general and administrative 7,792 7,760 15,719 15,306
Interest and other 43 655 350 765
Restructuring charge -- -- -- 1,092
Litigation settlement -- -- -- 4,000
---------- ---------- ---------- ----------
Total costs and expenses 26,450 26,780 51,352 57,720
---------- --------- ---------- ----------
Net loss before dividends on preferred stock (12,295) (8,466) (23,591) (21,437)
Dividends on preferred stock (1,504) (1,504) (2,992) (2,992)
---------- --------- ---------- ----------
Net loss applicable to common shares $ (13,799) $ (9,970) $ (26,583) $ (24,429)
========== ========= ========== ==========
Net loss per common share $ (.38) $ (.30) $ (.74) $ (.75)
========== ========= ========== ==========
Shares used in computing per share amounts 36,208 33,264 35,833 32,773
========== ========= ========== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE> 5
GENSIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------
<S> <C> <C>
1996 1995
---------- ----------
Cash flows from operating activities:
Net loss $ (23,592) $ (21,437)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation of property and equipment 1,827 1,905
Amortization of licenses 150 --
Amortization of unearned compensation 715 862
Litigation settlement -- 4,000
Loss on disposal of property and equipment 158 --
Change in operating assets and liabilities:
Accounts receivable 3,815 1,811
Inventories (163) (3,055)
Other current assets (51) 1,051
Accounts payable 1,134 (2,699)
Accrued research and development costs (301) (1,986)
Accrued payroll and related expenses 469 320
Other accrued liabilities (1,456) (583)
Deferred revenue 3,021 (2,200)
---------- ----------
Net cash used in operating activities (14,274) (22,011)
Cash flows from investing activities:
Proceeds from short-term investment 91,498 78,640
Purchases of short-term investments (102,233) (68,123)
Purchase of property and equipment (5,122) (2,274)
Deposits and other assets 304 1,636
Notes receivable from officers and employees (7) (268)
---------- ----------
Net cash (used in) provided by
investing activities (15,560) 9,611
Cash flows from financing activities:
Payments of preferred stock dividends -- (1,488)
Issuance of common stock and warrants, net 6,476 1,376
Issuance of long-term obligations 206 850
Principal payments on long-term obligations (362) (845)
---------- ----------
Net cash provided by (used in)
financing activities 6,320 (107)
---------- ----------
Decrease in cash and cash equivalents (23,514) (12,507)
Cash and cash equivalents at beginning of period 47,421 23,371
---------- ----------
Cash and cash equivalents at end of period $ 23,907 $ 10,864
========== ==========
Supplemental schedule of noncash financing activities:
Change in unrealized gain/(loss) on
available-for-sale securities $ (19) $ 3,343
<FN>
See accompanying notes.
</TABLE>
<PAGE> 6
GENSIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
ORGANIZATION
Gensia, Inc. ("Gensia" or the "Company"), a Delaware corporation, was
incorporated November 17, 1986. Gensia is a research-based company
focused on the discovery, development, manufacture and marketing of
health care products for the acute care market. Since inception, the
Company has been engaged in activities funded primarily through the sale
of the Company's equity.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its six wholly-owned subsidiaries, Gensia Europe Limited,
Gensia Laboratories, Ltd., Gensia GmbH, Aramed, Inc., Automedics
Development, Inc. and Gensia Development Corporation. All significant
intercompany accounts and transactions have been eliminated.
In the opinion of the Company, all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the
results for the three and six-month periods ended June 30, 1996 and 1995
have been made. The results of operations for the three and six-month
periods ended June 30, 1996 are not necessarily indicative of the results
to be expected for the full fiscal year.
The accompanying consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's 1995 Form 10-K filed with the Securities and
Exchange Commission.
2. LITIGATION SETTLEMENT
During the second half of 1992, several lawsuits were filed in the
U.S. District Court for the South District of California against Gensia,
certain of its directors and officers and Aramed. All lawsuits were
consolidated and a consolidated amended complaint filed. The
consolidated lawsuit alleged violations of federal and state law arising
out of an alleged failure to disclose information about the efficacy and
testing of the Company's Protara (trademark) drug during the period
February 27, 1992 to September 22, 1992. The suits sought damages on
behalf of an alleged class of investors who purchased Gensia common stock
or Aramed units during that period. Another suit was filed in November
1994 on behalf of an alleged class of purchasers of Gensia common stock
and Aramed units and common stock during the period September 22, 1992
through October 17, 1994 alleging failure to disclose information about
the efficacy and testing of Protara. Plaintiffs' complaints in the suits
did not specify an amount of claimed damages. Following notice to the
plaintiff classes and court hearing, on July 5, 1995, the Court approved
a Stipulation of Settlement entered into between Gensia, Aramed and the
other defendants with the plaintiffs in all the actions and dismissed the
action. The Stipulation of Settlement resolved all claims and dismissed
Aramed, Gensia and their officers and directors from the litigation
without any admission or presumption of wrongdoing by the defendants.
The settlement provided for Gensia to contribute shares of its common
stock having an aggregate value of $4 million, which the Company recorded
as a charge in the first quarter of 1995, and for Gensia's insurance
carriers to contribute $13 million in cash. The settlement is now
effective and the dismissal of the litigation is final and no longer
subject to appeal. The Gensia stock in payment of plaintiffs' attorney's
fees (30% of the $4 million) was issued and transferred to the
plaintiffs' counsel in 1995 and the remainder was issued to the class
members in the first quarter of 1996. The total number of shares issued
as a result of the litigation settlement was 799,974 shares.
<PAGE> 7
3. CONTINGENCIES
On October 21, 1994, an action was filed by Charles Richardson as
purported Qui Tam Plaintiff on behalf of the State of California against
an investigator who has worked on clinical studies for Gensia (Dr. Dennis
T. Mangano, a Professor at the University of California at San Francisco
("UCSF")), his organization (Ischemia Research and Education Foundation
("IREF")) and three companies for whom Dr. Mangano or IREF performed
studies (including Gensia, Inc.). On February 21, 1995 the existence of
this action was made public, and the complaint was served on February 27,
1995. The action alleges that Dr. Mangano and IREF failed to provide
proper compensation to the UCSF and the State of California in connection
with the performance of those studies, and that the three organizations
for whom the studies were performed are liable for such violations as
agents, co-conspirators, aiders and abettors, or otherwise. The
complaint alleges that these violations deprived UCSF and the State of
California of "millions of dollars," as well as certain publishing rights
and rights to inventions (e.g., licensing and royalty fees), and seeks
unspecified damages "according to proof," a trebling of those damages, a
civil penalty of $10,000 "for each violation," and attorney's fees.
Gensia and the other defendants have answered the Complaint, denying
liability and asserting various affirmative defenses. On June 12, 1996,
with the consent of the plaintiff and the Regents of The University of
California, The Court entered a dismissal of this action with prejudice
as to Gensia.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Gensia has been unprofitable on an annual basis since its inception in 1986
and expects to incur additional operating losses at least through 1996. For
the period from its inception to June 30, 1996, Gensia has incurred a
cumulative net loss of $242.9 million.
When used in this Form 10-Q, the words "expects", "anticipates",
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements involve risks and uncertainties, including the
timely development, regulatory approval, and successful marketing of new
products and acceptance of new products, the impact of competitive products,
product costs and pricing, changing market conditions and other risks
described in this Form 10-Q and in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995. Actual results may differ materially
from those projected. These forward-looking statements represent the
Company's judgment only as of the date of the filing of this Form 10-Q. The
Company disclaims, however, any intent or obligation to update these forward-
looking statements.
RESULTS OF OPERATIONS
The Company reported a net loss of $13.8 million, or $.38 per common share
(after undeclared and unpaid cumulative dividends on preferred stock of $1.5
million), in the second quarter ended June 30, 1996 compared to a net loss of
$10.0 million, or $.30 per common share (after undeclared and unpaid
cumulative dividends on preferred stock of $1.5 million), in the second
quarter of 1995. The Company reported a net loss of $26.6 million, or $.74
per common share (after undeclared and unpaid cumulative preferred stock
dividends of $3.0 million), compared to a net loss of $24.4 million, or $.75
per common share (after preferred stock dividends of $1.5 million paid in
March 1995 and $1.5 million in undeclared and unpaid cumulative preferred
stock dividends), for the six months ended June 30, 1996 and 1995,
respectively. The 1995 results for the first six months included a
restructuring charge of $1.1 million and a $4.0 million charge related to the
settlement of class action litigation.
Product sales were $12.8 million in the second quarter of 1996 compared to
$13.7 million in the second quarter of 1995, while gross profit from product
sales decreased to $2.9 million from $5.8 million. Product sales in the first
six months of 1996 of $25.7 million decreased from $27.0 million in the same
period of 1995. Gross profit from product sales decreased from $10.5 million
in the first six months of 1995 to $7.4 million for the same period of 1996.
These decreases are primarily attributable to increased competition for
certain of Gensia Laboratories' multi-source injectable products, particularly
etoposide. During 1995 and 1994, etoposide was Gensia Laboratories' largest
product in terms of sales and during 1995 and early 1996, a number of
competitors received FDA approval to market injectable etoposide. These
approvals have had and are expected to continue to have a material adverse
impact on the Company's sales and gross profit from etoposide. Continued
increases in sales of doxorubicin and the Laryngeal Mask Airway ("LMA") among
other products have helped to partially offset the impact of declining sales
of etoposide. The Company believes that overall product sales in the second
half of 1996 may be able to be maintained at levels achieved during the
comparable 1995 period, but gross margin percentages are likely to be lower
than those achieved during 1995.
Contract research and license fees were $800,000 in the second quarter of
1996 compared to $4.2 million in the second quarter of 1995. The decrease was
primarily a result of the termination of contract research agreements upon the
Company's acquisition of Aramed, Inc. ("Aramed") in the fourth quarter of 1995
and because of research and development payments received in 1995 from a
collaboration with Boerhinger Mannheim Pharmaceuticals Corporation. Gensia
recorded contract research and license fees during the quarter ended June 30,
1996 as a result of a research collaboration with Pfizer Inc. ("Pfizer")
entered into in May 1996. The transaction received regulatory clearance and
closed in the second quarter of 1996. Contract research and license fees in
1996 are expected to be lower than in 1995 although the amount will depend on
the degree to which Gensia is able to enter into additional collaborations.
The Company is engaged in discussions with pharmaceutical companies concerning
additional collaborations under which these companies would fund a portion of
Gensia's research and development efforts. There can be no assurance that any
additional agreements will be reached.
<PAGE> 9
Gensia's research and development expenses were $8.8 million in the 1996
second quarter, compared to $10.5 million in the 1995 second quarter. The
decrease is primarily the result of ongoing expense reduction programs.
Research and development expenses were $17.0 million for the six months ended
June 30, 1996 and $20.0 million for the same period of 1995. This decrease is
due to reductions in personnel in clinical development and data management as
a result of the restructuring in the first quarter of 1995 and to ongoing
expense reduction programs. The level of spending in research and development
will in part depend on the Company's ability to complete additional
collaborations with corporate partners to fund its research and development
programs.
Selling, general and administrative expenses were $7.8 million in the
second quarters of both 1996 and 1995. Selling, general and administrative
expenses were $15.7 million as opposed to $15.3 million for the six months
ended June 30, 1996 and 1995, respectively. This increase primarily results
from the expansion of sales and marketing activities and an increase in
advisory fees over the same period of 1995. Selling, general and
administrative expenses may continue to grow as Gensia builds its sales and
marketing organization for activities related to Gensia Laboratories, the LMA
and Brevibloc (registered trademark) and to support the GenESA (registered
trademark) System in Europe and potentially North America.
Interest income for the second quarter of 1996 increased to $0.6 million
from $0.5 million for the second quarter of 1995 due to higher average cash
and investment balances in 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, Gensia had cash, cash equivalents and short-term
investments of $46.1 million compared to $58.9 million at December 31, 1995.
The decrease reflects the impact of operating losses for the six month period
and capital expenditures related to the development of new production
capabilities at Gensia Laboratories. These items were partially offset by a
cash infusion from Pfizer of $8.8 million, discussed below, and initial
funding of $1.0 million towards capital expenditures related to construction
of new production capabilities at Gensia Laboratories.
Additional funding was received from a research collaboration with Pfizer
for the development of drugs for the treatment of pain using Gensia's
adenosine regulating agent (ARA) technology. Pfizer made an up-front
licensing payment of $3.0 million and provided up-front research funding of
$.8 million. Additional funding will be paid quarterly for a period of at
least two years. In conjunction with this research collaboration, Pfizer also
purchased 792,293 shares of the Company's common stock through a $5.0 million
equity investment. Gensia may also receive certain payments upon the
achievement of specified milestones and royalties on any product sales that
result from the collaboration. There can be no assurance that any milestones
will be achieved, that any compound will be successfully developed under this
collaboration or that any sales or royalty payments will result from a
developed compound.
Gensia believes that expense levels in the future will be dependent upon a
number of factors, including the potential cost of expanding its sales and
marketing organization to support product launches and increased emphasis on
commercial activities and costs associated with preclinical studies and
clinical trials for products under development. The amount of such costs, as
well as the spending necessary for working capital and capital requirements,
will depend on numerous factors including Gensia's ability to improve Gensia
Laboratories' current operations, the timing and outcome of further regulatory
actions related to the GenESA System, and the Company's ability to
successfully market the GenESA System in North America and Europe if
appropriate regulatory approvals are obtained. As previously disclosed, in
April 1996, the Company was informed by the U.S. Food and Drug Administration
("FDA") in an action letter that the New Drug Application for the GenESA
System is not currently approvable. The Company has had further discussions
with the FDA and is continuing to reanalyze data from one of its clinical
studies. The Company is planning to meet with the FDA in late September 1996
to review the results of the reanalysis. If the outcome is favorable, the
Company plans to file an amendment to the NDA after such meeting. In Canada,
the Canadian Health Protection Branch has asked Gensia to submit additional
information to obtain approval of the GenESA System and as a result, Gensia
has withdrawn its New Drug Submission in Canada. Gensia will decide in the
next several months whether to obtain and submit such information.
<PAGE> 10
Gensia Clinical Partners, L.P. owns certain rights to the GenESA System
technology which are subject to a purchase option by Gensia. Funding
requirements will also depend on the progress of the Company's research and
development programs as well as its ability to establish additional
collaborations with other pharmaceutical companies to fund these programs. In
addition, Gensia Laboratories is undertaking a significant capital expenditure
program during 1996 and 1997. The Company expects to finance this expansion
largely through new lease or debt financing secured against certain assets of
Gensia Laboratories. A commitment for lease financing for a significant
portion of the proposed expansion was issued by a third party in May 1996.
There can be no assurance that any additional financing will be available on
attractive terms, if at all.
The Company anticipates that its current capital resources, commitments
from third parties and continued efforts to reduce expenses will enable it to
maintain its current and planned operations into 1997. Gensia will need to
raise additional funds in order to maintain its planned operations through
1997. The Company is exploring a number of options to raise these additional
funds, including additional collaborative research and development
arrangements with pharmaceutical companies, the licensing of product rights to
third parties and private placements of the Company's equity. There can be no
assurance that additional funds will be available on favorable terms, if at
all.
If the Company is unable to raise additional funds, it may be forced to
take other significant measures to reduce its cash expenditures, including
significant reductions in its operations. These reductions may include
significant reductions of work force in addition to those implemented in the
first quarter of 1995. The Company may also be forced to delay, restrict or
eliminate certain research and development programs. Other possible measures
include the sale of certain noncurrent assets. These actions, if taken, could
have a material adverse effect on the Company.
Significant changes in operating assets and liabilities during the first
six months of 1996 were a $3.8 million decrease in accounts receivable, a $1.5
million decrease in other accrued liabilities and a $1.1 million increase in
accounts payable. The decrease in accounts receivable is largely due to lower
product sales and collection of accounts receivable. The decrease in other
accrued liabilities is primarily due to significant payments in 1996,
including payment of advisory fees related to the acquisition of Aramed in the
fourth quarter of 1995 and payment of 1995 accrued federal and state corporate
income taxes, primarily attributable to alternative minimum taxes. The
increase in accounts payable is due to raw materials purchases and commitments
for property and equipment by Gensia Laboratories in the second quarter of
1996. Net cash used in investing activities in the first six months of 1996
reflected net purchases of $10.7 million in short-term investments as a result
of normal treasury activities of the Company. Additionally, the Company
invested $5.2 million in property and equipment in the first six months of
1996, primarily as part of the expansion at Gensia Laboratories. The Company
expects the majority of its property and equipment requirements for 1996 to be
financed through leasing arrangements with third parties. The Company's
principal cash flow from financing activities in the first six months of 1996
was receipt of $6.5 million from the issuance of common stock, $5.0 million of
which was issued to Pfizer. The remaining balance was primarily from the
exercise of common stock options.
Gensia made quarterly cash dividend payments of approximately $1.5 million
per quarter on its outstanding preferred stock from June 1, 1993 through March
1, 1995. Subsequent to March 1995, as a measure to reduce cash outflows, the
Company's Board of Directors suspended quarterly cash dividend payments on its
outstanding preferred stock. Through June 1996, Gensia has approximately $7.5
million in undeclared cumulative preferred dividends. The Company's Board of
Directors has voted to declare and pay the quarterly dividend for the quarter
ending August 31, 1996 on September 1, 1996. If Gensia chooses to not declare
dividends for six cumulative quarters, the holders of this preferred stock,
voting separately as a class, will be entitled to elect two additional
directors until the dividend in arrears has been paid.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
During the second half of 1992, several lawsuits were filed in the U.S.
District Court for the South District of California against Gensia, certain of
its directors and officers and Aramed. All lawsuits were consolidated and a
consolidated amended complaint filed. The consolidated lawsuit alleged
violations of federal and state law arising out of an alleged failure to
disclose information about the efficacy and testing of the Company's Protara
drug during the period February 27, 1992 to September 22, 1992. The suits
sought damages on behalf of an alleged class of investors who purchased Gensia
common stock or Aramed units during that period. Another suit was filed in
November 1994 on behalf of an alleged class of purchasers of Gensia common
stock and Aramed units and common stock during the period September 22, 1992
through October 17, 1994 alleging failure to disclose information about the
efficacy and testing of Protara. Plaintiffs' complaints in the suits did not
specify an amount of claimed damages. Following notice to the plaintiff
classes and court hearing, on July 5, 1995, the Court approved a Stipulation
of Settlement entered into between Gensia, Aramed and the other defendants
with the plaintiffs in all the actions and dismissed the action. The
Stipulation of Settlement resolved all claims and dismissed Aramed, Gensia and
their officers and directors from the litigation without any admission or
presumption of wrongdoing by the defendants. The settlement provided for
Gensia to contribute shares of its common stock having an aggregate value of
$4 million, which the Company recorded as a charge in the first quarter of
1995, and for Gensia's insurance carriers to contribute $13 million in cash.
The settlement is now effective and the dismissal of the litigation is final
and no longer subject to appeal. The Gensia stock in payment of plaintiffs'
attorney's fees (30% of the $4 million) was issued and transferred to the
plaintiffs' counsel in 1995 and the remainder was issued to the class members
in the first quarter of 1996.
On October 21, 1994, an action was filed by Charles Richardson as purported
Qui Tam Plaintiff on behalf of the State of California against an investigator
who has worked on clinical studies for Gensia (Dr. Dennis T. Mangano, a
Professor at the University of California at San Francisco ("UCSF")), his
organization (Ischemia Research and Education Foundation ("IREF")) and three
companies for whom Dr. Mangano or IREF performed studies (including Gensia,
Inc.). On February 21, 1995 the existence of this action was made public, and
the complaint was served on February 27, 1995. The action alleges that Dr.
Mangano and IREF failed to provide proper compensation to the UCSF and the
State of California in connection with the performance of those studies, and
that the three organizations for whom the studies were performed are liable
for such violations as agents, co-conspirators, aiders and abettors, or
otherwise. The complaint alleges that these violations deprived UCSF and the
State of California of "millions of dollars," as well as certain publishing
rights and rights to inventions (e.g., licensing and royalty fees), and seeks
unspecified damages "according to proof," a trebling of those damages, a civil
penalty of $10,000 "for each violation," and attorney's fees. Gensia and the
other defendants have answered the Complaint, denying liability and asserting
various affirmative defenses. On June 12, 1996, with the consent of the
plaintiff and the Regents of The University of California, The Court entered a
dismissal of this action with prejudice as to Gensia.
<PAGE> 12
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 25, 1996, the Company held its Annual Meeting of Stockholders. The
following actions were taken at the annual meeting:
1. The following three Class I directors were elected:
a. 31,770,698 shares were voted in favor of Daniel O. Pegg, 165,444
shares withheld their vote and 3,956,757 shares were not voted;
b. 31,786,777 shares were voted in favor of Alan R. Timms, Ph.D.,
149,365 shares withheld their vote and 3,956,757 shares were not voted;
c. 31,800,323 shares were voted in favor of Monroe E. Trout, M.D.,
135,819 shares withheld their vote and 3,956,757 shares were not voted.
The following directors continue in office for their existing terms:
Jerry C. Benjamin; Paul K. Laikind, Ph. D.; L. John Wilkerson, Ph.D.;
James C. Blair, Ph.D.; Herbert J. Conrad; David F. Hale; Steven C.
Mendell.
2. A proposal to amend the Gensia, Inc. Amended and Restated 1990 Stock
Plan (the "1990 Plan") was approved. The proposal increased by 400,000
the aggregate number of shares of common stock reserved for issuance
under the 1990 Plan and increased the number of shares covered by the
automatic option grants to non-employee members of the Board of
Directors.
23,108,353 shares were voted in favor of the proposal, 8,181,137 were
voted against the proposal 68,924 abstained and 4,534,485 shares were
not voted or were broker non-votes.
3. A proposal to amend and restate the Gensia, Inc. Employee Stock
Purchase Plan (the "ESPP") was approved. The proposal increased by
100,000 the aggregate number of shares of common stock reserved for
issuance under the ESPP.
27,374,694 shares were voted in favor of the proposal, 3,913,648 shares
were voted against the proposal, 70,072 shares abstained and 4,534,485
shares were not voted or were broker non-votes.
4. The selection of Ernst & Young LLP as the Company's independent
auditors was ratified.
31,775,506 shares voted in favor of the proposal, 88,198 shares
were voted against the proposal, 72,438 shares abstained and 3,956,757
shares were not voted.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.54 Collaborative Research Agreement dated as of May 1, 1996
between the Company and Pfizer Inc. (Certain information has been
omitted from the Agreement pursuant to a request by the Company for
confidential treatment.)
10.55 License and Royalty Agreement dated May 1, 1996 between the
Company and Pfizer Inc. (Certain information has been omitted from
the Agreement pursuant to a request by the Company for confidential
treatment.)
10.56 Stock Purchase Agreement dated May 1, 1996 between the Company
and Pfizer Inc. (Certain information has been omitted from the
Agreement pursuant to a request by the Company for confidential
treatment.)
(b) Reports on Form 8-K during the second quarter.
None.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENSIA, INC.
Date: August 13, 1996 By: /s/ David F. Hale
---------------------------------------
David F. Hale
Chairman, President and Chief Executive Officer
Date: August 13, 1996 By: /s/ Daniel D. Burgess
---------------------------------------
Daniel D. Burgess
Vice President - Finance, Chief Financial
Officer and Treasurer
<PAGE>
EXHIBIT 10.54
[CERTAIN INFORMATION HAS BEEN OMITTED HEREIN PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.]
COLLABORATIVE RESEARCH AGREEMENT
This COLLABORATIVE RESEARCH AGREEMENT is entered into as of May 1, 1996 by and
between PFIZER, INC ("Pfizer"), a Delaware corporation, having an office at
235 East 42nd Street, New York, New York 10017 and its Affiliates, and GENSIA,
INC ("Gensia"), a Delaware corporation, having an office at 9360 Towne Centre
Drive, San Diego, California 92121.
WHEREAS, Gensia has expertise in the discovery, research, and development of
adenosine regulating agents; and
WHEREAS, Gensia has discovered and developed [CONFIDENTIAL TREATMENT
REQUESTED] and has filed the patent applications set forth in Exhibit A
attached to and made part of this Agreement with respect to the treatment of
pain; and
WHEREAS, the parties plan to seek patent protection for all Products which
make up the subject matter of this Agreement and the License Agreement; and
WHEREAS, Pfizer has the capability to undertake research for the discovery and
evaluation of agents for treatment of disease and also the capability for
clinical analysis, manufacturing and marketing of such agents.
NOW, THEREFORE, the parties agree as follows:
<PAGE>
2
1. DEFINITIONS
Whenever used in this Agreement, the terms defined in this Section 1 shall
have the meanings specified.
1.1 "AFFILIATE" means any corporation or other legal entity owning,
directly or indirectly, fifty percent (50%) or more of the voting capital
shares or similar voting securities of Pfizer or Gensia; any corporation or
other legal entity fifty percent (50%) or more of the voting capital shares or
similar voting rights of which is owned, directly or indirectly, by Pfizer or
Gensia or any corporation or other legal entity fifty percent (50%) or more of
the voting capital shares or similar voting rights of which is owned, directly
or indirectly, by a corporation or other legal entity which owns, directly or
indirectly, fifty percent (50%) or more of the voting capital shares or
similar voting securities of Pfizer or Gensia.
1.2 "ANNUAL RESEARCH PLAN" means the written plan describing the
research in the Area to be carried out during each Commitment Year by Pfizer
and Gensia pursuant to this Agreement. Each Annual Research Plan will be
attached to and made a part of this Agreement as Exhibit B.
1.3 "RESEARCH PROGRAM" is the collaborative research program in the
Area conducted by Pfizer and Gensia pursuant to the Annual Research Plans in
effect during the Contract Period.
1.4 "EFFECTIVE DATE" is May 1, 1996.
1.5 "CONTRACT PERIOD" means the period beginning on the Effective Date
and ending on the date on which this Agreement terminates.
<PAGE>
3
1.6 "COMMITMENT YEAR" means a twelve-month period commencing on each
anniversary of the Effective Date.
1.7 "AREA" means research or development with respect to [CONFIDENTIAL
TREATMENT REQUESTED] for the treatment of pain in human beings and animals, as
further defined in the Annual Research Plan.
1.8 "TECHNOLOGY" means and includes all materials, technology,
technical information, know-how, expertise and trade secrets within the Area.
1.9 "GENSIA TECHNOLOGY means Technology that is or was:
(a) developed by employees of or consultants to Gensia alone or
jointly with third parties prior to the Effective Date or since that date in
the course of activities not described in an Annual Research Plan; or;
(b) acquired by purchase, license, assignment or other means
from third parties by Gensia prior to the Effective Date that would not
otherwise be part of Joint Technology;
1.10 "JOINT TECHNOLOGY" means Technology that is or was:
(a) developed by employees of or consultants to Pfizer or Gensia
solely or jointly with each other during the Contract Period; or
(b) acquired by purchase, license, assignment or other means
from third parties by Gensia or Pfizer during the Contract Period.
<PAGE>
4
1.11 "PFIZER TECHNOLOGY" means Technology that is or was:
(a) developed by employees of or consultants to Pfizer alone or
jointly with third parties prior to the Effective Date or since that date in
the course of activities not described in an Annual Research Plan; or
(b) acquired by purchase, license, assignment or to other means
from third parties by Pfizer prior to the Effective Date that would not be
otherwise part of Joint Technology.
1.12 "GENSIA CONFIDENTIAL INFORMATION" means all information about any
element of the Gensia or Joint Technology which is disclosed by Gensia to
Pfizer and designated "Confidential" in writing by Gensia at the time of
disclosure to Pfizer to the extent that such information as of the date of
disclosure to Pfizer is not (i) demonstrably known to Pfizer other than by
virtue of a prior confidential disclosure to Pfizer by Gensia; or (ii)
disclosed in published literature, or otherwise generally known to the public
through no fault or
<PAGE>
5
omission of Pfizer; or (iii) obtained from a third party free from any
obligation of confidentiality to Gensia.
1.13 "PFIZER CONFIDENTIAL INFORMATION'' means all information about any
element of Pfizer or Joint Technology which is disclosed by Pfizer to Gensia
and designated "Confidential" in writing by Pfizer at the time of disclosure
to Gensia to the extent that such information as of the date of disclosure to
Gensia is not (i) demonstrably known to Gensia other than by virtue of a prior
confidential disclosure to Gensia by Pfizer; or (ii) disclosed in published
literature, or otherwise generally known to the public through no fault or
omission of Gensia; or (iii) obtained from a third party free from any
obligation of confidentiality to Pfizer.
1.14 "VALID CLAIM" means a claim within Patent Rights so long as such
claim shall not have been disclaimed by either Pfizer or Gensia or both, as
the case may be, or shall not have been held invalid in a final decision
rendered by a tribunal of competent jurisdiction from which no appeal has been
or can be taken.
1.15 "PATENT RIGHTS" shall mean:
(a) the Valid Claims of Gensia's patent applications listed in
Exhibit A, and patents issuing on them, including any division, continuation,
continuation-in-part, renewal, extension, re-examination, reissue or foreign
counterpart thereof; and
(b) all inventions deemed patentable within Pfizer Technology,
Gensia Technology and Joint Technology including all the Valid Claims of
patent applications, whether domestic or foreign, claiming such patentable
inventions, including all continuations, continuations-in-part, divisions, and
renewals, an letters patent granted thereon, and all reissues, re-examinations
and extensions thereof.
1.16 "PRODUCT" means any product, the manufacture, use of sale of which
would infringe Patent Rights in the absence of a license.
2. COLLABORATIVE RESEARCH PROGRAM
2.1 PURPOSE. Gensia and Pfizer shall conduct the Research Program
throughout the Contract Period. All Technology in the Area developed in the
Research Program will become part of the Joint Technology. The objective of
the Research Program is to discover and develop Products.
<PAGE>
6
2.2 ANNUAL RESEARCH PLAN. The Annual Research Plan for the first
Commitment Year is described in the attached Exhibit B. For each Commitment
Year after the first, the Annual Research Plan shall be prepared by the
Research Committee for submission to and approval by Pfizer and Gensia no
later than ninety (90) days before the end of the prior Commitment Year. Each
new Annual Research Plan for each succeeding Commitment Year shall be appended
to Exhibit B and made part of this Agreement.
2.3 EXCLUSIVITY Gensia and Pfizer each agree that during the Contract
Period, and in the Area, neither it nor any of its Affiliates shall conduct
research itself or sponsor any other research, or engage in any research
sponsored by any third party without the other's consent.
2.4 RESEARCH COMMITTEE
2.4.1 PURPOSE. Pfizer and Gensia shall establish a Research
Committee (the "Research Committee"):
(a) to review and evaluate progress under each Annual Research
Plan:
(b) to prepare the Annual Research Plan for each Commitment year;
and
(c) to coordinate and monitor publication of research results
obtained from and the exchange of information and materials that relate to the
Research Program.
<PAGE>
7
2.4.2 MEMBERSHIP. Pfizer and Gensia each shall appoint, in its
sole discretion, three members to the Research committee. Substitutes may be
appointed at any time.
The members initially shall be:
Pfizer Appointees:
Gensia Appointees:
Mark D. Erion, Ph.D., Kevin M. Mullane, Ph.D., James B. Wiesner, Ph.D.
2.4.3 CHAIR. The Research Committee shall be chaired by two co-
chairpersons, one appointed by Pfizer and the other appointed by Gensia.
2.4.4 MEETINGS. The Research Committee shall meet at least
quarterly, at places and on dates selected by each party in turn.
Representatives of Pfizer or Gensia or both, in addition to members of the
Research Committee, may attend such meetings at the invitation of either
party.
2.4.5 MINUTES. The Research Committee shall keep accurate minutes
of its deliberations which record all proposed decisions and all actions
recommended or taken. Drafts of the minutes shall be delivered to all Research
Committee members within ten (10) business days after each meeting. The party
hosting the meeting shall be responsible for the preparation and circulation
of the draft minutes. Draft minutes shall be edited by the co-chairpersons and
shall be issued in final form only with their approval and agreement.
<PAGE>
8
2.4.6 DECISIONS. All technical decisions of the Research
Committee shall be made by majority of the members.
2.4.7 EXPENSES. Pfizer and Gensia shall each bear all expenses of
their respective members related to their participation on the Research
Committee.
2.5 REPORTS AND MATERIALS.
2.5.1 REPORTS. During the Contract Period, Pfizer and Gensia each
shall furnish to the Research Committee:
(a) summary written reports within thirty (30) days after the end
of each three-month period commencing on the Effective Date, describing its
progress under the Annual Research Plan; and
(b) comprehensive written reports within thirty (30) days after
the end of each Commitment Year, describing in detail the work accomplished by
it under the Annual Research Plan during the commitment year and discussing
and evaluating the results of such work.
2.5.2 MATERIALS. Gensia and Pfizer shall, during the Contract
Period, as a matter of course as described in the Annual Research Plan, or
upon each other's written or oral request, furnish to each other samples of
biochemical, biological or synthetic chemical materials which are part of
Pfizer Technology, Gensia Technology or Joint Technology and which are
necessary for each party to carry out its responsibilities under the Annual
Research Plan. To the extent that the quantities of materials requested by
either party exceed the quantities set forth in the Annual Research Plan, the
requesting party shall reimburse the other party for the reasonable costs of
such materials if they are furnished.
<PAGE>
9
2.6 LABORATORY FACILITY AND PERSONNEL. Gensia shall provide suitable
laboratory facilities, equipment and personnel for the work to be done by
Gensia in carrying out the Research Program.
2.7 DILIGENT EFFORTS. Pfizer and Gensia each shall use reasonably
diligent efforts to achieve the objectives of the Research Program and each
Annual Research Plan.
3. FUNDING.
3.1 TECHNOLOGY ACCESS FEE. In consideration of disclosure to Pfizer of
Gensia's [CONFIDENTIAL TREATMENT REQUESTED] in the Area and Gensia's technical
knowledge and expertise related thereto, [CONFIDENTIAL TREATMENT REQUESTED]
upon execution of this Agreement.
3.2 RESEARCH FUNDING. The annual research funding for each year of
the Contract Period shall be [CONFIDENTIAL TREATMENT REQUESTED], for research
and development activities scheduled to be performed by Gensia [CONFIDENTIAL
TREATMENT REQUESTED].
3.3 ADDITIONAL RESEARCH FUNDING. In the event that the Research
Committee elects to pursue research on a Pfizer compound and, in the opinion
of the Research Committee, such research might exceed the Contract Period,
[CONFIDENTIAL TREATMENT REQUESTED] under the same terms and conditions hereof.
<PAGE>
10
4. TREATMENT OF CONFIDENTIAL INFORMATION
4.1 CONFIDENTIALITY
4.1.1 Pfizer and Gensia each recognize that the other's
Confidential Information constitutes highly valuable, confidential
information. Subject to the terms and conditions of the License and Royalty
Agreement between the parties of even date with this Agreement (the "License
Agreement"), the obligations set forth in Section 4.3 and the publication
rights set forth in Section 4.2, Pfizer and Gensia each agree that during the
term of this Agreement and for five (5) years thereafter, it will keep
confidential, and will cause its Affiliates to keep confidential, all Gensia
Confidential Information or Pfizer Confidential Information, as the case may
be, that is disclosed to it, or to any of its Affiliates pursuant to this
Agreement. Neither Pfizer nor Gensia nor any of their respective Affiliates
shall use such Confidential Information except as expressly permitted in this
Agreement.
4.1.2 Pfizer and Gensia each agree that any disclosure of the
other's Confidential Information to any officer, employee or agent of the
other party or of any of its Affiliates shall be made only if and to the
extent necessary to carry out its responsibilities under this Agreement and
shall be limited to the maximum extent possible consistent with such
responsibilities. Pfizer and Gensia each agree not to disclose the other's
Confidential Information to any third parties under any circumstance without
written permission from the other party. Each party shall take such action,
and shall cause its Affiliates to take such action, to preserve the
confidentiality of each other's Confidential Information as it would
customarily take to preserve the confidentiality of its own Confidential
Information. Each party, upon the other's request, will return all the
Confidential Information disclosed to the
<PAGE>
11
other party pursuant to this Agreement, including all copies and extracts of
documents, within sixty (60) days of the request upon the termination of this
Agreement except for one (1) copy which may be kept for the purpose of
complying with continuing obligations under this Agreement.
4.1.3 Gensia and Pfizer each represent that all of its employees,
and any consultants to such party, participating in the Research Program who
shall have access to Pfizer Technology, Gensia Technology or Joint Technology
and Pfizer Confidential Information and Gensia Confidential Information are
bound by agreement to maintain such information in confidence.
4.2 PUBLICATION. Notwithstanding any matter set forth with
particularity in this Agreement to the contrary, results obtained in the
course of the Research Program may be submitted for publication following
scientific review by the Research Committee and subsequent approval by
Gensia's and Pfizer's managements, which approval shall not be unreasonably
withheld. After receipt of the proposed publication by both Pfizer's and
Gensia's managements written approval or disapproval shall be provided within
thirty (30) days for a manuscript, within fourteen (14) days for an abstract
for presentation at, or inclusion in the proceedings of a scientific meeting,
and within fourteen (14) days for a transcript of an oral presentation to be
given at a scientific meeting.
4.3 PUBLICITY. Except as required by law, neither party may
disclose the terms of this Agreement nor the research described in it without
the written consent of the other party, which consent shall not be
unreasonably withheld.
<PAGE>
12
4.4 DISCLOSURE OF INVENTIONS. Each party shall promptly inform the
other about all inventions in the Area that are conceived, made or developed
in the course of carrying out the Research Program by employees of, or
consultants to, either of them solely, or jointly with employees of, or
consultants to the other.
4.5 RESTRICTIONS ON TRANSFERRING MATERIALS. Pfizer and Gensia
recognize that the biological, synthetic chemical and biochemical materials
which are part of Pfizer Technology, Gensia Technology or Joint Technology,
represent valuable commercial assets. Therefore, [CONFIDENTIAL TREATMENT
REQUESTED], except as may be required in a contract described in Section
1.9(b) or 1.11(b), Gensia and Pfizer agree not to transfer such joint
materials or materials of the other party to any third party, unless prior
written consent for any such transfer is obtained from the other party.
5. INTELLECTUAL PROPERTY RIGHTS. The following provisions relate to rights
in the intellectual property developed by Gensia or Pfizer, or both, during
the course of carrying out the Research Program.
5.1 OWNERSHIP. All Gensia Confidential Information and Gensia
Technology shall be owned by Gensia. All Pfizer Confidential Information and
Pfizer Technology shall be owned by Pfizer. All Joint Technology shall be
owned jointly by Gensia and Pfizer. All Patent Rights shall be jointly owned
by Gensia and Pfizer.
5.2 GRANTS OF RESEARCH LICENSES. Gensia and Pfizer each grants to the
other a nonexclusive, irrevocable, worldwide, royalty-free, perpetual license,
including the right to grant sublicenses to Affiliates, to make and use
Confidential Information, Technology and Patent Rights for all research
purposes other than the sale or manufacture for sale of
<PAGE>
13
products or processes. Notwithstanding the forgoing, [CONFIDENTIAL TREATMENT
REQUESTED], Pfizer shall not conduct research by itself or sponsor any other
research, or engage in any research sponsored by any third party in the Area
without Gensia's consent.
6. PROVISIONS CONCERNING THE FILING. PROSECUTION AND MAINTENANCE OF PATENT
RIGHTS. The following provisions relate to the filing, prosecution and
maintenance of Patent Rights during the term of this Agreement:
6.1 FILING, PROSECUTION AND MAINTENANCE BY GENSIA. With respect to
Patent Rights in which Gensia employees or consultants, alone or together with
Pfizer employees, or consultants are named as inventors, Gensia shall have the
exclusive right and obligation:
(a) to file applications for letters patent on any invention
deemed patentable included in Patent Rights; provided, however, that Gensia
shall consult with Pfizer regarding countries in which such patent
applications should be filed and shall file patent applications in those
countries where Pfizer requests that Gensia file such applications; and,
further provided, that Gensia, at its option and expense, may file in
countries where Pfizer does not request that Gensia file such applications;
(b) to take all reasonable steps to prosecute all pending and new
patent applications included within Patent Rights;
<PAGE>
14
(c) to respond to oppositions, nullity actions, re-examinations,
revocation actions and similar proceedings filed by third parties against the
grant of letters patent for such applications;
(d) to maintain in force any letters patent included in Patent
Rights by duly filing all necessary papers and paying any fees required by the
patent laws of the particular country in which such letters patent were
granted; and
(e) to cooperate fully with, and take all necessary actions
requested by, and letters patent included in Patent Rights. Gensia shall
notify Pfizer in a timely manner of any decision to abandon a pending patent
application or an issued patent included in Patent Rights. Thereafter, Pfizer
shall have the option, at its expense, of continuing to prosecute any such
pending patent application or of keeping the issued patent in force.
6.1.1 COPIES OF DOCUMENTS. Gensia shall provide to Pfizer copies
of all patent applications that are part of Patent Rights prior to filing, for
the purpose of obtaining substantive comment of Pfizer patent counsel. Gensia
shall also provide to Pfizer copies of all documents relating to prosecution
of all such patent applications in a timely manner and shall provide to Pfizer
every six (6) months a report detailing their status. Pfizer shall provide to
Gensia every six (6) months a report detailing the status of all patent
applications that are a part of Patent Rights in which Pfizer employees or
consultants alone are named as inventors.
6.1.2 REIMBURSEMENT OF COSTS FOR FILING PROSECUTING AND
MAINTAINING PATENT RIGHTS. Within thirty (30) days of receipt of invoices from
Gensia, Pfizer shall reimburse Gensia for all the costs of filing,
prosecuting, responding to
<PAGE>
15
opposition and maintaining patent applications and patents in countries where
Pfizer requests that patent applications be filed, prosecuted and maintained.
Such reimbursement shall be in addition to Funding Payments. However, Pfizer
may, upon sixty (60) days notice, request that Gensia discontinue filing or
prosecution of patent applications in any country and discontinue reimbursing
Gensia for the costs of filing, prosecuting, responding to opposition or
maintaining such patent application or patent in any country. Gensia shall pay
all costs in those countries in which Pfizer does not request that Gensia
file, prosecute or maintain patent applications and patents, but in which
Gensia, at its option, elects to do so.
6.1.3 Pfizer shall have the right to file on behalf of and as an
agent for Gensia all applications and take all actions necessary to obtain
patent extensions pursuant to 35 U.S.C. Section 156 and foreign counterparts
for Patent Rights described in this Section 6.1 licensed to Pfizer. Gensia
agrees, to sign, at Pfizer's expense, such further documents and take such
further actions as may be requested by Pfizer in this regard.
6.2 FILING, PROSECUTION AND MAINTENANCE BY PFIZER. With respect to
Patent Rights in which Pfizer employees or consultants alone are named as
inventors, Pfizer shall have those rights and duties ascribed to Gensia in
Section 6.1.
6.3 Neither party may disclaim a Valid Claim within Patent Rights
without the consent of the other.
7. ACQUISITION OF RIGHTS FROM THIRD PARTIES.
(a) During the Contract Period, Gensia and Pfizer shall each
promptly notify each other of any and all opportunities to acquire in any
manner from third
<PAGE>
16
parties, technology or patents or information which may be useful in or may
relate to the Research Program. Gensia and Pfizer shall decide if such rights
should be acquired in connection with the Research Program and, if so, whether
by Gensia, Pfizer or both. If acquired, such rights shall become part of the
Confidential Information, Technology or Patent Rights, whichever is
appropriate, of the acquiring party or Joint Technology, as the case may be.
(b) Pfizer acknowledges and agrees that Gensia is granting
to Pfizer pursuant to this Agreement no rights to products other than the
Products.
8. OTHER AGREEMENTS. Concurrently with the execution of this Agreement,
Gensia and Pfizer shall enter into the License Agreement appended to and made
part of this Agreement as Exhibit C and the Stock Purchase Agreement appended
to and made a part of this Agreement as Exhibit D. This Agreement, the Stock
Purchase Agreement and the License Agreement are the sole agreements with
respect to the subject matter and supersede all other agreements and
understandings between the parties with respect to same.
9. TERM, TERMINATION AND DISENGAGEMENT.
9.1 TERM. Unless sooner terminated or extended, this Agreement shall
expire two (2) years from the Effective Date.
9.2 EVENTS OF TERMINATION. The following events shall constitute
events of termination ("Events of Termination"):
<PAGE>
17
(a) any material written representation or warranty by Gensia or
Pfizer, or any of its officers, made under or in connection with this
Agreement shall prove to have been incorrect in any material respect when
made.
(b) Gensia or Pfizer shall fail in any material respect to perform
or observe any term, covenant or understanding contained in this Agreement or
in any of the other documents or instruments delivered pursuant to, or
concurrently with, this Agreement, and any such failure shall remain
unremedied for thirty (30) days after written notice to the failing party.
9.3 TERMINATION.
9.3.1 Upon the occurrence of any Event of Termination, the party
not responsible may, by notice to the other party, terminate this Agreement.
9.3.2 If Pfizer terminates this Agreement pursuant to Section
9.3.1, or upon expiration of this Agreement pursuant to Section 9.1, the
License Agreement shall continue according to its terms. If Gensia terminates
this Agreement pursuant to Section 9.3.1, the License Agreement shall
terminate immediately.
9.4 Termination of this Agreement by either party, with or without
cause, will not terminate the licenses granted pursuant to Section 5.2.
9.5 Termination of this Agreement for any reason shall be without
prejudice to:
(a) the rights and obligations of the parties provided in Sections
4 and 12;
(b) Gensia's right to receive all payments accrued under Section
3; or
(c) any other remedies which either party may otherwise have.
<PAGE>
18
10. REPRESENTATIONS AND WARRANTIES. Gensia and Pfizer each represents and
warrants as follows:
10.1 It is a corporation duly organized, validly existing and is in
good standing under the laws of the State of Delaware, is qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the conduct of its business of the ownership of its properties
requires such qualification and has all requisite power and authority,
corporate or otherwise, to conduct its business as now being conducted, to
own, lease and operate its properties and to execute. delivery and perform
this Agreement.
10.2 The execution, delivery and performance by it of this Agreement
have been duly authorized by all necessary corporate action and do not and
will not
(a) require any consent or approval of its stockholders, (b)
violate any provision of any law, rule, regulations, order, writ, judgment,
injunctions, decree, determination award presently in effect having
applicability to it or any provision of its certificate of incorporation or
by-laws or (c) result in a breach of or constitute a default under any
material agreement, mortgage, lease, license, permit or other instrument or
obligation to which it is a party or by which it or its properties may be
bound or affected.
10.3 This Agreement is a legal, valid and binding obligation of it
enforceable it in accordance with its terms and conditions, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws, from time to time in effect,
affecting creditor's rights generally.
<PAGE>
19
10.4 It is not under any obligation to any person, or entity,
contractual or otherwise, that is conflicting or inconsistent in any respect
with the terms of this Agreement or that would impede the diligent and
complete fulfillment of its obligations.
10.5 It has good and marketable title to or valid leases or licenses
for, all of its properties, rights and assets necessary for the fulfillment of
its responsibilities under the Research Program, subject to no claim of any
third party other than the relevant lessors or licensors.
11. COVENANTS OF GENSIA AND PFIZER OTHER THAN REPORTING REQUIREMENTS.
Throughout the Contract Period, Gensia and Pfizer each shall:
11.1 maintain and preserve its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in good standing in each
jurisdiction in which such qualification is from time to time necessary or
desirable in view of their business and operations or the ownership of their
properties.
11.2 comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any government authority to
the extent necessary to conduct the Research Program, except for those laws,
rules, regulations, and orders it.
12. INDEMNIFICATION. Pfizer will indemnify Gensia for damages, settlements,
costs, legal fees and other expenses incurred in connection with a claim
against Gensia based on any action or omission of Pfizer, its agents or
employees related to the obligations of Pfizer under this Agreement; provided,
however, that the foregoing shall not apply (i) if the claim is found to be
based upon the negligence, recklessness or willful misconduct of Gensia or
<PAGE>
20
(ii) if Gensia falls to give Pfizer prompt notice of any claim it receives
and such failure materially prejudices Pfizer with respect to any claim or
action to which Pfizer's obligation pursuant to this Section applies. Pfizer,
in its sole discretion, shall choose legal counsel, shall control the defense
of such claim or action and shall have the right to settle same on such terms
and conditions it deems advisable; provided however, it shall obtain Gensia's
prior consent to such part of any settlement which requires payment or other
action by Gensia or is likely to have a material adverse effect on Gensia's
business.
13. NOTICES. All notices shall be in writing mailed via certified mail,
return receipt requested, courier, or facsimile transmission addressed as
follows, or to such other address as may be designated from time to time:
If to Pfizer: To Pfizer at its address as set forth at the beginning of
this Agreement.
Attention: President, Central Research
with copy to: Office of the General Counsel.
If to Gensia: To Gensia at its address as set forth at the beginning of
this Agreement.
Attention: President
with copy to: Vice President and General Counsel.
Notices shall be deemed given as of the date received.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. MISCELLANEOUS.
<PAGE>
21
15.1 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective legal representatives,
successors and permitted assigns.
15.2 HEADINGS. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original.
15.4 AMENDMENT, WAIVER. This Agreement may be amended, modified,
superseded or canceled, and any of the terms nay be waived, only by a written
instrument executed by each party or, in the case of waiver, by the party or
parties waiving compliance. The delay or failure of any party at any time or
times to require performance of any provisions shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of any
condition or of the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed to be, or
considered as, a further or continuing waiver of any such condition or of the
breach of such term or any other term of this Agreement.
15.5 NO THIRD PARTY BENEFICIARIES. No third party including any
employee of any party to this Agreement, shall have or acquire any rights by
reason of this Agreement. Nothing contained in this Agreement shall be deemed
to constitute the parties partners with each other or any third party.
15.6 ASSIGNMENT AND SUCCESSORS. This Agreement may not be assigned by
either party, except that each party may assign this Agreement and the rights
and interests of such
<PAGE>
22
party, in whole or in part, to any of its Affiliates, any purchaser of all or
substantially all of its assets or to any successor corporation resulting from
any merger or consolidation of such party with or into such corporations.
15.7 FORCE MAJEURE. Neither Pfizer nor Gensia shall be liable for
failure of or delay in performing obligations set forth in this Agreement, and
neither shall be deemed in breach of its obligations, if such failure or delay
is due to natural disasters or any causes reasonably beyond the control of
Pfizer or Gensia.
15.8 SEVERABILITY. If any provision of this Agreement is or becomes
invalid or is ruled invalid by any court of competent jurisdiction or is
deemed unenforceable, it is the intention of the parties that the remainder of
the Agreement shall not be affected.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
PFIZER, INC.
By: /s/ George M. Milne, Jr.
GENSIA, INC.
By: /s/ Paul K. Laikind
<PAGE>
23
CONFIDENTIAL
EXHIBIT A
Patent status
[CONFIDENTIAL TREATMENT REQUESTED]
Gensia filings
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
CONFIDENTIAL
EXHIBIT B
[CERTAIN INFORMATION HAS BEEN OMITTED HEREIN PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2.]
Research Program
[CONFIDENTIAL TREATMENT REQUESTED]
/s/Yoshikihiko Kitaura /s/Kevin Mullane
- --------------------------- ----------------------
Yoshikihiko Kitaura Kevin Mullane
/s/Mark Erion
----------------------
Mark Erion
Central Research Division Gensia, Inc.
5-2 Taketoyo 9360 Towne Centre Drive
Aichi, 470-23, Japan San Diego, CA 92121
<PAGE>
CONFIDENTIAL
1. INTRODUCTION 3
[CONFIDENTIAL TREATMENT REQUESTED]
4. RESEARCH COMMITTEE 6
5. RESEARCH PLAN 7
[CONFIDENTIAL TREATMENT REQUESTED]
6. APPENDIX 11
[CONFIDENTIAL TREATMENT REQUESTED]
6.4 PHARMACOLOGY METHODS 14
6.5 GENERAL PHARMACOLOGY 1 15
6.6 GENETIC TOXICOLOGY 16
6.7 GENERAL PHARMACOLOGY 2 16
6.8 EXPLORATORY TOXICOLOGY 16
6.9 PATENT STATUS 16
6.10 REFERENCES 18
2
<PAGE>
CONFIDENTIAL
1. Introduction
Conventional therapy for the management of pain, relying on NSAIDs, narcotics,
and muscle relaxants. is suboptimal due to insufficient efficacy,
gastrointestinal side effects and/or dependence liability. Currently, there is
no satisfactory therapy available for the treatment of neuropathic pain. Thus,
there is a clear medical need for more efficacious, well-tolerated and non-
addicting drugs for the treatment of pain, particularly for chronic pain.
[CONFIDENTIAL TREATMENT REQUESTED]
[CONFIDENTIAL TREATMENT REQUESTED]
With an emergence of new science in molecular pharmacology, many targets have
been identified for discovery of novel analgesics. We believe that the
[CONFIDENTIAL TREATMENT REQUESTED] as a therapeutic approach for controlling
severe acute pain and chronic pain is a very promising approach outside of
NSAIDs and opioids. The [CONFIDENTIAL TREATMENT REQUESTED] project will also
compliment five other internal pain discovery initiatives that are already in
place in the Nagoya research group. The goal for the Pfizer-Gensia
collaboration is to rapidly identify and nominate a candidate and clinically
demonstrate analgesic efficacy.
2. [CONFIDENTIAL TREATMENT REQUESTED] Pain
Injury to body tissues can produce pain through activation of specialized
nerve endings in the skin and other organs. Pain information is transmitted by
the primary sensory nerve fibers, A(Greek sign Delta)- and C-fibers, which
synapse with neurons in the superficial layers of the dorsal horn of the
spinal cord (substantia gelatinosa), the first point of control for pain
information flowing into the CNS. These neurons project to higher centers in
the brain stem and thalamus, which in turn send information to the cerebral
cortex where the pain is perceived. In addition to relaying acute pain
signals, neurons in the spinal cord can become sensitized during certain forms
of chronic pain and produce a sustained rate of firing even to normally
innocuous stimuli. This heightened neuronal sensitivity underlies the
hyperesthesia and allodynia which can occur in inflammatory and neuropathic
pain states. Therefore, the neuronal mechanisms which produce acute pain
responses are different from those occurring in chronic pain.
In the clinic, acute and chronic pain are often treated differently. The use
of opiate drugs is mainly confined to the treatment of severe acute pain, such
as that resulting from surgery or tissue trauma and in cancer patients. This
is due, in part, to concerns over tolerance and addiction, but also because
these drugs are poorly effective in neuropathic pain states. On the other
hand, NSAIDs
3
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
4
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
5
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
4. Research Committee
The Pfizer-Gensia collaboration will be managed by a research committee
composed minimally of six individuals, three each from Gensia and Pfizer.
Project leaders chosen from each company will co-chair the committee and
coordinate its overall operation. The committee will meet on a quarterly basis
and will be primarily responsible for (l) generating and updating on an annual
basis, a specific research plan, (2) guiding the execution of specific aspects
of the research program and (3) implementing strategic decisions agreed by
Pfizer and Gensia management. It is anticipated that additional individuals
may serve as necessary on an ad hoc basis as the collaboration progresses
though the major phases.
The responsibilities of the research committee include:
a) Create and manage the execution of the annual research plan.
b) Select lead compounds for SAR studies.
c) Establish an appropriate screening strategy to characterize potential
candidates.
d) Identifying candidates for development consideration by Pfizer (RFD).
e) Review and recommend publication and patent strategies.
It is anticipated that the quarterly research committee meetings will
alternate between San Diego and Nagoya, or be held at another mutually
convenient site. Agendas of these meetings will be set by the research
committee and will be provided for review at both sites prior to the meeting.
Minutes will be distributed to both Pfizer and Gensia management and are
intended primarily to reflect quarterly progress of the collaboration. The
host for the quarterly meeting will assemble the report and, after both groups
are in agreement on contents, arrange for appropriate distribution. The report
should issue within 3 weeks of the meeting.
6
<PAGE>
CONFIDENTIAL
5. Research Plan
[CONFIDENTIAL TREATMENT REQUESTED]
In addition to the quarterly meetings, the chemistry and biology project
leaders of each company will interact on a monthly basis (or as often as
required) to review the program progress. To facilitate discussion, Gensia and
Pfizer project leaders will issue a Monthly Progress Report and distribute to
both Pfizer and Gensia research teams. The monthly interaction will be made by
the phone and/or teleconference.
Progress Report:
Gensia:
[CONFIDENTIAL TREATMENT REQUESTED]
Pfizer:
[CONFIDENTIAL TREATMENT REQUESTED]
5.1 Laboratory objectives
[CONFIDENTIAL TREATMENT REQUESTED]
7
<PAGE>
CONFIDENTIAL
5.2 Candidate criteria
[CONFIDENTIAL TREATMENT REQUESTED]
8
<PAGE>
CONFIDENTIAL
5.3. Recommendation for development (RFD)
[CONFIDENTIAL TREATMENT REQUESTED]
5.4 Chemistry
[CONFIDENTIAL TREATMENT REQUESTED]
9
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
5.5 Search for new leads
[CONFIDENTIAL TREATMENT REQUESTED]
5.6 Bulk requirements
[CONFIDENTIAL TREATMENT REQUESTED]
5.7 Project manning
[CONFIDENTIAL TREATMENT REQUESTED]
10
<PAGE>
CONFIDENTIAL
6. Appendix
[CONFIDENTIAL TREATMENT REQUESTED]
11
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
12
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
13
<PAGE>
CONFIDENTIAL
6.4 Pharmacology methods
[CONFIDENTIAL TREATMENT REQUESTED]
14
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
6.5 General Pharmacology 1
[CONFIDENTIAL TREATMENT REQUESTED]
15
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
6.6 Genetic Toxicology
[CONFIDENTIAL TREATMENT REQUESTED]
6.7 General Pharmacology 2
[CONFIDENTIAL TREATMENT REQUESTED]
6.8 Exploratory Toxicology
[CONFIDENTIAL TREATMENT REQUESTED]
6.9 Patent status
[CONFIDENTIAL TREATMENT REQUESTED]
16
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
17
<PAGE>
CONFIDENTIAL
6.10 References
[CONFIDENTIAL TREATMENT REQUESTED]
18
<PAGE>
CONFIDENTIAL
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE> 1
EXHIBIT 10.55
[CERTAIN INFORMATION HAS BEEN OMITTED HEREIN PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2. THE REDACTED
MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.]
LICENSE AND ROYALTY AGREEMENT
This LICENSE AND ROYALTY AGREEMENT is entered into as of May 1, 1996
(the "Effective Date") by and between Pfizer, Inc. ("Pfizer"), a
Delaware corporation, having an office at 235 East 42nd Street, New
York, New York 10017 and its Affiliates and Gensia, Inc. ("Gensia"),
a Delaware corporation, having an office at 9360 Towne Centre Drive,
San Diego, California 92121.
WHEREAS, Pfizer desires to obtain an exclusive license to Gensia's
right, title and interest in the Patent Rights so that Pfizer can
manufacture, use or sell the Products; and
WHEREAS, Gensia is willing to grant such license;
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth in this Agreement, the parties agree as follows:
1. Definitions. The capitalized terms used in this Agreement and
not defined elsewhere in it shall have the meanings specified for
such terms in this Section I and in the Research Agreement.
1.1 "Research Agreement" means the Collaborative Research
Agreement between Pfizer and Gensia effective May 1, 1996.
1.2 [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE> 2
1.3 "Net Sales" means the gross amount invoiced by Pfizer or
any sublicensee of Pfizer for sales [CONFIDENTIAL TREATMENT
REQUESTED].
1.4 "Product" means any product, the manufacture, use or sale
of which would infringe Patent Rights in the absence of a license.
2. Grant of License, Term, Rights and Obligations.
2.1 License Granted to Pfizer under the Patent Rights. Gensia
grants to Pfizer the exclusive, worldwide license, including the
right to grant sublicenses, to manufacture, use and sell Product for
all pharmaceutical indications in human beings and animals under all
Gensia's Right, title and interest in the Patent Rights (the
"License"). Notwithstanding anything herein to the contrary, Gensia
shall have the right to use Gensia Technology at any time and for any
purpose outside the Area, and the right to use Gensia Technology in
the Area following termination or expiration of this Agreement.
2.2 Term of License Grant and Payment of Royalties. Unless
terminated earlier as provided below, [CONFIDENTIAL TREATMENT
REQUESTED].
2.3 Pfizer Obligations.
2.3.1 Pfizer shall use reasonably diligent efforts to
exploit Products commercially, including, without limitation,
conducting clinical trials and obtaining regulatory approvals.
<PAGE> 3
2.3.2 If Pfizer grants a sublicense pursuant to Section
2, Pfizer shall guarantee that any sublicensee fulfills all of
Pfizer's obligations under this Agreement; provided, however, that
Pfizer shall not be relieved of its obligations pursuant to this
Agreement.
2.4 Technical Assistance. Gensia shall provide to Pfizer or
any sublicensee of Pfizer, at Pfizer's request and expense, any
technical assistance reasonably necessary to enable Pfizer or such
sublicensee to manufacture, use or sell each Product and to enjoy
fully all the rights granted to Pfizer pursuant to this Agreement;
provided, however, that Gensia is reasonably capable of providing
that assistance.
2.5 Reversion of Rights. If Pfizer discontinues the
development of any Product after RFD Approval, and if such
discontinuance results from circumstances other than (i) action by
the U.S. Food and Drug Administration, or other regulatory body, or
(ii) a determination by Pfizer that the Product is significantly
lacking in efficacy or safety, and if, at the time of such
discontinuance, Pfizer has not begun development of another Product,
the licenses granted to Pfizer pursuant to this Agreement shall
terminate with respect to the discontinued Product. [CONFIDENTIAL
TREATMENT REQUESTED]
<PAGE> 4
[CONFIDENTIAL TREATMENT REQUESTED].
2.6 [CONFIDENTIAL TREATMENT REQUESTED]
3. Royalties, Payments of Royalties, Accounting for Records,
Milestone Payments.
3.1 Patent Rights. Pfizer shall pay Gensia a royalty based on
the Net Sales of each Product. [CONFIDENTIAL TREATMENT REQUESTED]. By
way of further explanation, [CONFIDENTIAL TREATMENT REQUESTED]
<PAGE> 5
[CONFIDENTIAL TREATMENT REQUESTED].
3.2 Royalty Rates.
3.2.1 Pfizer shall pay Gensia a royalty for the sale of
each Product under Section 2.1 as set forth in this Section 3.2.
3.2.2 Products With One Indication. The royalty paid by
Pfizer to Gensia shall be [CONFIDENTIAL TREATMENT REQUESTED]
[CONFIDENTIAL TREATMENT REQUESTED]
For purposes of this Agreement, "DEA Scheduled" means a Product which
is or becomes listed on one of the schedules of controlled substances
set forth in 21 CFR (section)1308, as such schedules are changed,
updated or republished from time to time, and "DEA Non-scheduled"
means any other Product.
3.2.3 PRODUCTS WITH MORE THAN ONE INDICATION. The royalty
paid by Pfizer to Gensia for Products with more than one indication
shall be [CONFIDENTIAL TREATMENT REQUESTED].
<PAGE> 6
3.2.4 PRODUCTS BASED ON PFIZER COMPOUNDS. The royalty
paid by Pfizer to Gensia for Products based on compounds from
Pfizer's library shall be the [CONFIDENTIAL TREATMENT REQUESTED]:
[CONFIDENTIAL TREATMENT REQUESTED]
3.2.5 COST OF GOODS. In the event that Pfizer's
manufacturing cost of goods, including, without limitation, all
royalty payments due to Gensia, as determined in the same manner as
Pfizer determines its cost of goods for any similar pharmaceutical
product consistently applying generally accepted accounting
principles, [CONFIDENTIAL TREATMENT REQUESTED] of Net Sales for a
particular Product, then Gensia's royalty for that Product shall be
adjusted [CONFIDENTIAL TREATMENT REQUESTED]:
[CONFIDENTIAL TREATMENT REQUESTED]
In the event that Gensia develops a manufacturing method for a
Product that is more cost effective than the method used by Pfizer,
Pfizer will reasonably consider the use of such method.
<PAGE> 7
[CONFIDENTIAL TREATMENT REQUESTED]
In the event that Gensia develops a manufacturing method for a
Product that is more cost effective than the method used by Pfizer,
Pfizer will reasonably consider the use of such method.
3.3 Payment Dates. Royalties shall be paid by Pfizer on Net
Sales within sixty (60) days after the end of each calendar quarter
in which such Net Sales are made. Such payments shall be accompanied
by a statement showing the Net Sales of each Product by Pfizer or any
sublicensee of Pfizer in each country, the applicable royalty rate
for such Product, and a calculation of the amount of royalty due.
3.4 Accounting. The Net Sales used for computing the
royalties payable to Gensia by Pfizer shall be computed and paid in
U.S. dollars by wire transfer. For purposes of determining the amount
of royalties due, the amount of Net Sales in any foreign currency
shall be computed by (a) converting such amount into dollars at a
rate equal to the prevailing commercial rate of exchange for
purchasing dollars with such foreign currency as published in the
WALL STREET JOURNAL for the close of the last business day of the
calendar quarter for which the relevant royalty payment is to be made
by Pfizer and (b) deducting the amount of
<PAGE> 8
any governmental tax, duty, charge, or other fee actually paid in
respect of such conversion into, and remittance of dollars.
3.5 Records. Pfizer shall keep for three (3) years from the
date of each payment of royalties complete and accurate records of
sales by Pfizer of each Product in sufficient detail to allow the
accruing royalties to be determined accurately. Gensia shall have the
right for a period of three (3) years after receiving any report or
statement with respect to royalties due and payable to appoint at its
expense an independent certified public accountant reasonably
acceptable to Pfizer to inspect the relevant records of Pfizer or its
sublicensee to verify such report or statement. Pfizer shall make its
records available for inspection by such independent certified public
accountant during regular business hours at such place or places
where such records are customarily kept, upon reasonable notice from
Gensia, to verify the accuracy of the reports and payments. Such
inspection right shall not be exercised more than once in any
calendar year nor more than once with respect to sales in any given
period. Gensia agrees to hold in strict confidence all information
concerning royalty payments and reports, and all information learned
in the course of any audit or inspection, except to the extent
necessary for Gensia to reveal such information in order to enforce
its rights under this Agreement or if disclosure is required by law.
The failure of Gensia to request verification of any report or
statement during said three-year period shall be considered
acceptance of the accuracy of such report, and Pfizer shall have no
obligation to maintain records pertaining to such report or statement
beyond said three-year period. The results of each inspection, if
any, shall be binding on both parties.
<PAGE> 9
3.6 Milestone Payments. Pfizer shall pay Gensia,
[CONFIDENTIAL TREATMENT REQUESTED], the payment listed opposite that
Event. Payments shall be made in U.S. dollars by wire transfer.
[CONFIDENTIAL TREATMENT REQUESTED].
[CONFIDENTIAL TREATMENT REQUESTED]
<PAGE> 10
If Pfizer develops a Product [CONFIDENTIAL TREATMENT
REQUESTED].
3.7 Renegotiation of Royalty Rates. The parties acknowledge
that the royalty rates set forth in Section 3.2 are based on the
premise that Products [CONFIDENTIAL TREATMENT REQUESTED].
3.8 [CONFIDENTIAL TREATMENT REQUESTED].
<PAGE> 11
4. Legal Action.
4.1 Actual or Threatened Disclosure or Infringement. When
information comes to the attention of Pfizer to the effect that any
Patent Rights relating to a Product have been or are threatened to be
unlawfully infringed, Pfizer shall have the right at its expense to
take such action as it may deem necessary to prosecute or prevent
such unlawful infringement, including the right to bring or defend
any suit, action or proceeding involving any such infringement;
provided, however, Pfizer shall obtain Gensia's prior consent to such
part of any settlement which requires payment or other action by
Gensia or has a material adverse effect on Gensia's business. Pfizer
shall notify Gensia promptly of the receipt of any such information
and of the commencement of any such suit, action or proceeding. If
Pfizer determines that it is necessary or desirable for Gensia to
join any such suit, action or proceeding, Gensia shall, at Pfizer's
expense, execute all papers and perform such other acts as may be
reasonable required to permit Pfizer to act in Gensia's name. If
Pfizer brings a suit, it shall have the right first to reimburse
itself out of any sums recovered in such suit or in its settlement
for all costs and expenses, including attorney's fees, related to
such suit or settlement, and twenty-five percent (25%) of any funds
that shall remain from said recovery shall be paid to Gensia and the
balance of such funds shall be retained by Pfizer. If Pfizer does
not, within one hundred twenty (120) days after giving notice to
Gensia of the above-described information, notify Gensia of Pfizer's
intent to bring suit against any infringer, Gensia shall have the
right to bring suit for such alleged infringement, but it shall not
be obligated to do so, and may join Pfizer as party plaintiff, if
appropriate, in which event Gensia shall hold Pfizer free, clear and
harmless from any and all costs and expenses of such
<PAGE> 12
litigation, including attorney's fees, and any sums recovered in any
such suit or in its settlement shall belong to Gensia. However,
twenty-five percent (25%) of any such sums received by Gensia, after
deduction of all costs and expenses related to such suit or
settlement, including attorney's fees paid, shall be paid to Pfizer.
Each party shall always have the right to be represented by counsel
of its own selection and as its own expense in any suit instituted by
the other for infringement under the terms of this Section. If Pfizer
lacks standing and Gensia has standing to bring any such suit, action
or proceeding, then Gensia shall do so at the request of Pfizer and
at Pfizer's expense.
4.2 Defense of Infringement Claims. Gensia will cooperate
with Pfizer at Pfizer's expense in the defense of any suit, action or
proceeding against Pfizer or any sublicensee of Pfizer alleging the
infringement of the intellectual property rights of a third party by
reason of the use of Patent Rights in the manufacture, use or sale of
the Product. Pfizer shall give Gensia prompt written notice of the
commencement of any such suit, action or proceeding or claim of
infringement and will furnish Gensia a copy of each communication
relating to the alleged infringement. Gensia shall give to Pfizer all
authority (including the right to exclusive control of the defense of
any such suit, action or proceeding and the exclusive right after
consultation with Gensia, to compromise, litigate, settle or
otherwise dispose of any such suit, action or proceeding),
information and assistance necessary to defend or settle any such
suit, action or proceeding; provided, however, Pfizer shall obtain
Gensia's prior consent to such part of any settlement which requires
payment or other action by Gensia or has a material adverse effect on
Gensia's business. If the parties agree that Gensia should institute
or join any suit, action or proceeding pursuant to this Section,
Pfizer may, at Pfizer's
<PAGE> 13
expense, join Gensia as a defendant if necessary or desirable, and
Gensia shall execute all documents and take all other actions,
including giving testimony, which may reasonably be required in
connection with the prosecution of such suit, action or proceeding.
4.3 Hold Harmless. Gensia agrees to defend, protect,
indemnify and hold harmless Pfizer and any sublicensee of Pfizer,
from and against any loss or expense arising from any proved claim of
a third party that it has been granted rights by Gensia that Pfizer
or any sublicensee of Pfizer in exercising their rights granted to
Pfizer by Gensia pursuant to this Agreement, has infringed upon such
rights granted to such third party by Gensia.
4.4 Third Party Licenses. If the manufacture, use or sale by
Pfizer of a Product in any country would, in the opinion of both
Pfizer and Gensia, infringe a patent owned by a third party, Pfizer
and Gensia shall attempt to obtain a license under such patent. If
Pfizer obtains a license under such patent, [CONFIDENTIAL TREATMENT
REQUESTED] of any payments made by Pfizer to such third party shall
be deductible from royalty payments due from Pfizer to Gensia
pursuant to this Agreement; provided, however, that in no event shall
royalties payable to Gensia be reduced by more than [CONFIDENTIAL
TREATMENT REQUESTED] as a result of all such deductions. All such
computations, payments, and adjustments shall be on a country by
country and patent by patent basis.
5. Representation and Warranty. Gensia represents and warrants to
Pfizer that it has the right to grant the License granted pursuant to
this Agreement, and that the License so granted does not conflict
with or violate the terms of any agreement between Gensia and any
third party.
<PAGE> 14
6. Treatment of Confidential Information.
6.1 Confidentiality.
6.1.1 Pfizer and Gensia each recognize that the other's
Confidential Information constitutes highly valuable, confidential
information. Subject to Pfizer's rights and obligations pursuant to
this Agreement, Pfizer and Gensia each agree that during the term of
the Research Agreement and for five (5) years thereafter, it will
keep confidential, and will cause its Affiliates to keep
confidential, all Gensia Confidential Information or Pfizer
Confidential Information, as the case may be, that is disclosed to it
or to any of its Affiliates pursuant to this Agreement.
6.1.2 Subject to Pfizer's rights and obligations pursuant
to this Agreement, Pfizer and Gensia each agree that any disclosure
of the other's Confidential Information to any officer, employee or
agent of the other party or of any of its Affiliates shall be made
only if and to the extent necessary to carry out its responsibilities
under this Agreement and shall be limited to the maximum extent
possible consistent with such responsibilities. Subject to Pfizer's
rights and obligations pursuant to this Agreement, Pfizer and Gensia
each agree not to disclose the other's Confidential Information to
any third parties under any circumstance without written permission
from the other party. Each party shall take such action, and shall
cause its Affiliates to take such action, to preserve the
confidentiality of each other's Confidential Information as it would
customarily take to preserve the confidentiality of its own
Confidential Information. Each party, upon the other's request, will
return all the Confidential Information disclosed to the other party
pursuant to this Agreement, including all copies and extracts of
documents, within sixty (60) days of the request upon the
<PAGE> 15
termination of this Agreement except for one (I) copy which may be
kept for the purpose of complying with continuing obligations under
this Agreement.
6.2 Publicity. Except as required by law, neither party may
disclose the terms of this Agreement without the written consent of
the other party, which consent shall not be unreasonably withheld.
6.3 Disclosure of Inventions. Each party shall promptly
inform the other about all inventions in the area that are conceived,
made or developed in the course of carrying out the Research Program
by employees of, consultants to, either of them solely, or jointly
with employees of, or consultants to the other.
7. Provisions Concerning the filing, Prosection and Maintenance of
Patent Rights. The following provisions relate to the filing,
prosecution and maintenance of Patent Rights during the term of this
Agreement:
7.1 Filing, Prosection and Maintenance by Gensia. With
respect to Patent Rights in which Gensia employees or consultants,
alone or together with Pfizer employees, or consultants are named as
inventors, Gensia shall have the exclusive right and obligation:
(a) to file applications for letters patent on any patentable
invention included to Patent Rights; provided, however, that Gensia
shall consult with Pfizer regarding countries in which such patent
applications should be filed and shall file patent applications in
those countries where Pfizer requests that Gensia file such
applications; and, further provided, that Gensia, at its option and
expense, may file in countries where Pfizer does not request that
Gensia file such applications;
<PAGE> 16
(b) to prosecute all pending and new patent applications
included within Patent Rights;
(c) to respond to oppositions, nullity actions, re-
examinations, revocation actions and similar proceedings filed by
third parties against the grant of letters patent for such
applications; and
(d) to maintain in force any letters patent included in
Patent Rights by duly filing all necessary papers and paying any fees
required by the patent laws of the particular country in which such
letters patent were granted. Gensia shall notify Pfizer in a timely
manner of any decision to abandon a pending patent application or an
issued patent included in Patent Rights. Thereafter, Pfizer shall
have the option, at its expense, of continuing to prosecute any such
pending patent application or of keeping the issued patent in force.
7.1.1 Copies of Documents. Gensia shall provide to Pfizer
copies of all patent applications that are part of Patent Rights
prior to filing, for the purpose of obtaining substantive comment to
Pfizer patent counsel. Gensia shall also provide to Pfizer copies of
all documents relating to prosecution of all such patent applications
in a timely manner and shall provide to Pfizer every six (6) months a
report detailing their status. Pfizer shall provide to Gensia every
six (6) months a report detailing the status of all patent
applications that are a part of Patent Rights in which Pfizer
employees or consultants alone are named as inventors.
7.1.2 Reimbursement of Costs for Filing, Prosecuting and
Maintaining Patent Rights. Within thirty (30) days of receipt of
invoices from Gensia, Pfizer shall reimburse
<PAGE> 17
Gensia for all the costs of filing, prosecuting, responding to
opposition and maintaining patent applications and patents in
countries where Pfizer requests that patent applications be filed,
prosecuted and maintained. Such reimbursement shall be in addition to
Funding Payments. However, Pfizer may, upon sixty (60) days' notice,
request that Gensia discontinue filing or prosection of patent
applications in any country and discontinue reimbursing Gensia for
the costs of filing, prosecuting, responding to opposition or
maintaining such patent application or patent in any country. Gensia
shall pay all costs in those countries in which Pfizer does not
request that Gensia file, prosecute or maintain patent applications
and patents, but in which Gensia, at its option, elects to do so.
7.1.3 Pfizer shall have the right to file on behalf of
Gensia all applications and take all actions necessary to obtain
patent extensions pursuant to 35 USC Section 156 for Patent Rights
described in this Section 7.1 licensed to Pfizer. Gensia agrees to
sign, at Pfizer's expense, such further documents and take such
further action as may be requested by Pfizer in this regard.
7.2 Filing, Prosecution and Maintenance by Pfizer. With
respect to Patent Rights in which Pfizer employees or consultants
alone are named as inventors, Pfizer shall have those rights and
duties ascribed to Gensia in Section 7.1.
7.3 Neither party may disclaim a Valid Claim with Patent
Right without the consent of the other.
8. Other Agreements. Concurrently with the execution of this
Agreement, Gensia and Pfizer shall enter into the Research Agreement
and the Stock Purchase Agreement. This
<PAGE> 18
Agreement, the Stock Purchase Agreement and the Research Agreement
are the sole agreements with respect to the subject matter and
supersede all other agreements and understanding between the parties
with respect to same.
9. Termination and Disengagement.
9.1 Event of Termination. The following events shall
constitute events of termination ("Events of Terminations"):
(a) Any material written representation or warranty by
Gensia or Pfizer, or any of its officers, made under or in connection
with this Agreement shall prove to have been incorrect in any
material respect when made.
(b) Gensia or Pfizer shall fail in any material respect
to perform or observe any term, covenant or understanding contained
in this Agreement or in any of the other documents or instruments
delivered pursuant to, or concurrently with, this Agreement, and any
such failure shall remain unremedied for thirty (30) days after
written notice to the failing party.
(c) Termination of the Research Agreement pursuant to
section 9.3.1 thereof.
9.2 Termination. Upon the occurrence of any Event of
Termination, the party not responsible may, by notice to the other
party, terminate this Agreement.
9.3 Termination of this Agreement by either party, with or
without cause, will not terminate the licenses granted pursuant to
Section 5.2 of the Research Agreement.
9.4 Termination of this Agreement for any reason shall be
without prejudice to:
(a) the rights and obligations of the parties provided
in Section 6 and 10;
(b) Gensia's right to receive all royalty payments
accrued hereunder; or
<PAGE> 19
(c) any other remedies which either party may otherwise
have.
10. Indemnification. Pfizer will indemnify Gensia for damages,
settlements, costs, legal fees and other expenses incurred in
connection with a claim against Gensia based on any action or
omission of Pfizer, its agents or employees related to the
obligations of Pfizer under this Agreement; provided, however, that
the foregoing shall not apply (i) if the claim if found to be based
upon the negligence, recklessness or willful misconduct of Gensia, or
(ii) if Gensia fails to give Pfizer prompt notice of any claim it
receives and such failure materially prejudices Pfizer with respect
to any claim or action to which Pfizer's obligation pursuant to this
Section applies. Pfizer, in its sole discretion, shall choose legal
counsel, shall control the defense of such claim or action, and shall
have the right to settle same on such terms and conditions it deems
advisable; provided, however, it shall obtain Gensia's prior consent
to such part which requires payment or other action by, or is likely
to have a material adverse effect on the business of Gensia.
11. Notices. All notices shall be in writing mailed via certified
mail, return receipt requested, courier, or facsimile transmission
addressed as follows, or to such other address as may be designated
from time to time.
If to Pfizer: To Pfizer at its address as set forth at the
beginning of this Agreement
Attention: President, Central Research
with copy to: Office of the General Counsel
If to Gensia: To Gensia at its address as set forth at the
beginning of this Agreement
Attention: President
with copy to: Vice President and General Counsel
Notices shall be deemed given as of the date received.
<PAGE> 20
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
13. Miscellaneous.
13.1 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.
13.2 Headings. Paragraph headings are inserted for
convenience of reference only and do not form a part of this
Agreement.
13.3 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original.
13.4 Amendment, Waiver. This Agreement may be amended,
modified, superseded or canceled, and any of the terms may be waived,
only by a written instrument executed by each party or, in the case
of waiver, by the party or parties waiving compliance. The delay or
failure of any party at any time or times to require performance of
any provisions shall in no manner affect the rights at a later time
to enforce the same. No waiver by any party of any condition or of
the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed
to be, or considered as, a further or continuing waiver of any such
condition or of the breach of such term or any other term of this
Agreement.
13.5 No Third Party Beneficiaries. No third party including
any employee of any party to this Agreement, shall have or acquire
any rights by reason of this Agreement. Nothing contained in this
Agreement shall be deemed to constitute the parties partners with
each other or any third party.
<PAGE> 21
13.6 Assignment and Successors. This Agreement may not be
assigned by either party, except that each party may assign this
Agreement and the rights and interests of such party, in whole or in
part, to any of its Affiliates, any purchaser of all or substantially
all of its assets or to any successor corporation resulting from any
merger or consolidation of such party with or into such corporations.
13.7 Force Majeure. Neither Pfizer nor Gensia shall be liable
for failure of or delay in performing obligations set forth in this
Agreement, and neither shall be deemed in breach of its obligations,
if such failure or delay is due to natural disasters or any causes
reasonable beyond the control of Pfizer or Gensia.
13.8 Severability. If any provision of this Agreement is or
becomes invalid or is ruled invalid by any court of competent
jurisdiction or is deemed unenforceable, it is the intention of the
parties that the remainder of the Agreement shall not be affected.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives.
PFIZER, INC. GENSIA, INC.
By: /s/ George M. Milne By: /s/ Paul K. Laikind
----------------------- ----------------------------
Title:President, Central Research Title:Vice President, Corporate
---------------------------- -------------------------
Development
-----------
Date: May 3, 1996 Date: April 25, 1996
---------------------------- --------------
<PAGE>
EXHIBIT 10.56
[CERTAIN INFORMATION HAS BEEN OMITTED HEREIN PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2. THE REDACTED
MATERIAL HAS BEEN SEPARATELY FILED WITH THE COMMISSION.]
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of the 1st day of May, 1996 by and between GENSIA, INC., a
Delaware corporation (the "Company"), and PFIZER INC., a Delaware
corporation (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
I. PURCHASE AND SALE OF STOCK.
1.1 Sale and Issuance of Common Stock. Subject to the
terms and conditions of this Agreement, Investor hereby purchases and
the Company hereby sells and issues to Investor 792,293 shares (the
"Original Shares") of the Company's Common Stock for the purchase
price of 120% of the average Nasdaq closing price per share during
the 20-day consecutive trading period ending five days prior to the
date hereof (such average Nasdaq closing price is hereinafter
referred to as the "Base Price" and such per share purchase price is
hereinafter referred to as the "Per Share Purchase Price") for an
aggregate of $5,000,002.66 (the "Purchase Price").
1.2 Closing. The purchase and sale of the Common Stock
shall take place at the offices of the Company, 9360 Towne Centre
Drive, San Diego, California, at 10 A.M., on the date hereof, or at
such other times and places as the Company and Investor mutually
agree upon, verbally or in writing (which times and places are
designated as the "Closing"). At the Closing the Company shall
deliver to Investor a certificate representing the Common Stock which
such Investor is purchasing against delivery to the Company by such
Investor of a bank wire in same day funds in the amount of the
Purchase Price therefor payable to the Company's order.
1.3 [CONFIDENTIAL TREATMENT REQUESTED]
1.4 Definitions.
(a) The following terms, as used herein, have the
following meanings:
"Closing Date" means the date of the Closing.
"Common Stock" means the Common Stock, par value $0.01
per share of the Company, together with the associated preferred
stock purchase rights established pursuant to the Rights Agreement
dated March 9, 1992 between the Company and First Interstate Bank of
California as rights agent (the "Rights").
"Material Adverse Effect" means a material adverse effect
on the condition (financial or otherwise), business, assets, results
of operations of a corporation and its subsidiaries taken as a whole.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Person" shall mean an individual, corporation,
partnership, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Investor that:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business as
now conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so
to qualify would have a Material Adverse Effect.
2.2 CAPITALIZATION. The authorized capital of the
Company consists of:
(i) PREFERRED STOCK. 5,000,000 shares of Preferred
Stock, of which 1,840,000 shares have been designated $3.75
Convertible Exchangeable Preferred Stock, par value $.01 per share
(the "Convertible Preferred Stock"), and 100,000 shares have been
designated Series I Participating Preferred Stock, par value $.01 per
share (the "Participating Preferred Stock"). There are 1,600,000
shares of Convertible Preferred Stock and no
- -2-
<PAGE>
shares of Participating Preferred Stock, respectively, issued and
outstanding.
(ii)COMMON STOCK. 75,000,000 shares of Common Stock, of
which 34,756,492 shares were issued and outstanding on February 29,
1996.
2.3 AUTHORIZATION. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for
(i) the authorization, execution and delivery of this Agreement, (ii)
the performance of all obligations of the Company hereunder and (iii)
the authorization, issuance (or reservation for issuance) and
delivery of the Common Stock being sold hereunder, to the extent that
the foregoing requires performance on or prior to the Closing, has
been taken and this Agreement constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
2.4 VALID ISSUANCE OF COMMON STOCK. The Common Stock
purchased by the Investor hereunder has been duly and validly issued
and is fully paid and nonassessable and, based in part upon the
representations of the Investor in this Agreement, was issued in
compliance with all applicable federal and state securities laws.
2.5 COMPLIANCE WITH LAWS AND COURT ORDERS; NO DEFAULTS.
(a) The Company is not in violation of any applicable
law, rule, regulation, judgment, injunction, order or decree except
for violations that have not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
(b) The Company is not in default under, and no
condition exists that with notice or lapse of time or both would
constitute a default under, any agreement or other instrument binding
upon the Company or any license, franchise, permit or similar
authorization held by the Company, which defaults or potential
defaults, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is
not in violation or default of any provisions of its Charter
documents or Bylaws or of any judgment, order, writ or decree by
which it is bound. The Company is not in violation or default of any
instrument or contract to which it is a party or by which it is bound
or, to the best knowledge of its officers after reasonable inquiry,
of any provision of any federal or state statute (including without
limitation environmental and labor laws and filing requirements under
the Employee Retirement Income Security Act of 1974), rule or
regulation applicable to the Company, which violation or default
would have a Material
- -3-
<PAGE>
Adverse Effect. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated
hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event which results
in the creation of any material lien, charge or encumbrance upon any
assets of the Company.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR. This
Agreement is made with Investor in reliance upon the Investor's
representation and warranties to the Company, which by such
Investor's execution of this Agreement the Investor hereby confirms,
that:
3.1 ORGANIZATION AND EXISTENCE. Investor is a
corporation duly incorporated, validly existing and in good standing
under the laws of Delaware and has all corporate powers and all
material governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except
for those licenses, authorizations, permits, consents and approvals
the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect.
3.2 CORPORATE AUTHORIZATION. This execution, delivery
and performance by Investor of this Agreement are within the
corporate powers of Investor and have been duly authorized by all
necessary corporate action on the part of Investor. This Agreement
constitutes its valid and legally binding obligation, enforceable in
accordance with its terms.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Common Stock
to be received by Investor will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that
Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing
this Agreement, Investor further represents that Investor does not
have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to
any third person, with respect to any of the Common Stock.
3.4 CONFIDENTIALITY. Investor hereby represents,
warrants and covenants that it shall maintain in confidence, and
shall not use or disclose without the prior written consent of the
Company, any information identified as confidential that is furnished
to it by the Company in connection with this Agreement. This
obligation of confidentiality shall not apply, however, to any
information (a)in the public domain through no unauthorized act or
failure to act by Investor, or (b)lawfully disclosed to the Investor
by a third party who possessed such information without any
obligation of confidentiality. Investor
- -4-
<PAGE>
further covenants that it shall return to the Company all tangible
materials containing such information upon request by the Company.
Investor agrees that it will restrict access to the Company's
confidential information among its officers, directors and employees
to those persons with a need to use such information.
3.5 RESTRICTED SECURITIES. Investor understands that
the shares of Common Stock it is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as
they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under
the 1933 Act, only in certain limited circumstances. In this
connection Investor represents that it is familiar with Securities
and Exchange Commission ("SEC") Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the 1933
Act.
3.6 LEGENDS. It is understood that the certificates
evidencing the Common Stock may bear one or all of the following
legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act or an opinion of
counsel satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(b) If required by the authorities of any state in
connection with the issuance or sale of the Common Stock the legend
required by such state authority.
4. ADDITIONAL DELIVERIES TO INVESTOR AT CLOSING. The
obligations of Investor under Subsection of this Agreement are
subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective if
such Investor does not consent in writing thereto:
4.1 COMPLIANCE CERTIFICATE. The President or a Vice
President of the Company shall deliver to Investor at the Closing a
certificate stating that there has been no material adverse change in
the business, affairs, prospects, operations, properties, assets or
condition of the Company since March 31, 1996 other than because of
operating losses and changes in the ordinary course of business and
other than as set forth in the Company's press release dated April
29, 1996, a copy of which is attached hereto.
4.2 SECRETARY'S CERTIFICATE. The Secretary of the
Company shall deliver to Investor at the Closing a certificate
- -5-
<PAGE>
certifying that attached thereto are true and complete copies of each
of the following documents:
a. Restated Certificate of Incorporation as in effect
on the Closing Date, of the Company;
b. Bylaws, as amended as in effect on the Closing
Date, of the Company; and
c. Copies of the resolutions of the Company's Board of
Directors authorizing execution and delivery of this Agreement, the
Collaborative Research Agreement and the License and Royalty
Agreement (each of the latter two agreements being dated as of the
date hereof between the parties hereto) and performance of the
transactions contemplated herein and therein.
4.3 HSR ACT. If applicable, the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, including
any extensions of said waiting period, shall have expired and any
investigations relating to the transactions contemplated herein and
in the Collaborative Research Agreement and the License and Royalty
Agreement referred to in Subsection 4.2(c) of this Agreement that may
have been opened by either the Department of Justice or the Federal
Trade Commission (by means of a request for additional information or
otherwise) shall have been terminated.
5. REGISTRATION RIGHTS. The Company covenants and
agrees as follows:
5.1 CERTAIN ADDITIONAL DEFINITIONS.
As used in this Agreement, the following capitalized
terms shall have the following meanings:
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by such Registration Statement
and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by
reference in such prospectus.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and
such registration statement or document becoming effective under the
1933 Act.
"REGISTRABLE SECURITIES" shall mean (i)the Common Stock
of the Company purchased by the Investor pursuant to this Agreement;
and (ii)any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant,
- -6-
<PAGE>
right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement
of, such Common Stock.
"REGISTRATION STATEMENT" shall mean any registration
statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all
material incorporated by reference in such Registration Statement.
5.2 REGISTRATION. The Company will use its reasonable
best efforts to effect a registration to permit the sale of the
Registrable Securities as described below, and pursuant thereto the
Company will:
(a) prepare and file by June 30, 1996, and use its
reasonable best efforts to thereafter have declared effective by the
SEC, a Registration Statement on Form S-3 relating to resale of all
of the shares of the Registrable Securities and use its reasonable
best efforts to cause such Registration Statement to remain
continuously effective for a period which will terminate when all
Registrable Securities covered by such Registration Statements, as
amended from time to time, have been sold or when the Registrable
Securities may be sold under Rule 144(k) under the 1933 Act.
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the
Prospectus as may be necessary to keep such Registration Statement
effective for the period specified in Section 5.2(a) and to comply
with the provisions of the 1933 Act and the 1934 Act with respect to
the distribution of all Registrable Securities;
(c) notify the Investor, promptly, and confirm such
notice in writing, (i) when the Prospectus or any supplement or post-
effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective, (ii) of any request by the SEC for amendments
or supplements to the Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, and (iv) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose;
(d) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible moment;
- -7-
<PAGE>
(e) furnish to the Investor, without charge, at least
one copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all,
upon a Investor's request, documents incorporated therein by
reference and all exhibits thereto (including those incorporated by
reference);
(f) deliver to the Investor, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as it may reasonably request in
order to facilitate the disposition of the Registrable Securities;
(g) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange or
market on which similar securities issued by the Company are then
listed, and if the securities are not so listed to use its reasonable
best efforts promptly to cause all such securities to be listed on
either the New York Stock Exchange, the American Stock Exchange or
the Nasdaq Stock Market;
(h) use reasonable best efforts to qualify or register
the Registrable Securities for sale under (or obtain exemptions from
the application of) the Blue Sky laws of such jurisdictions as are
applicable. The Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of
process in any such jurisdiction where it is not presently qualified
or where it would be subject to general service of process or
taxation as a foreign corporation in any jurisdiction where it is not
now so subject.
(I) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC under the 1933
Act and the 1934 Act and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable
Securities hereunder.
Investor shall furnish to the Company such information
regarding the distribution of such securities as the Company may from
time to time reasonably request in writing.
If at any time, the Company delivers a certificate in
writing to the Investor, to the effect that a delay in the sale of
Registrable Securities by the Investor under the Registration
Statement is necessary because a sale pursuant to such Registration
Statement in its then current form would reasonably be expected to
constitute a violation of the federal securities laws the Investor
shall agree not to sell or otherwise transfer such Registrable
Securities for the period of time specified by the Company in its
certificate. In no event shall such delay exceed ten (10) business
days; PROVIDED, HOWEVER, that if, prior to the expiration of such ten
(10) business day period, the Company delivers a certificate in
writing to the Investor to the effect that a further delay in such
sale beyond such ten (10)
- -8-
<PAGE>
business day period is necessary because a sale pursuant to such
Registration Statement in its then current form would reasonably be
expected to constitute a violation of the federal securities laws,
the Company may refuse to permit the Investor to resell any
Registrable Securities pursuant to such Registration Statement for an
additional period not to exceed five (5) business days.
5.3 Registration Expenses. All expenses incident to
the Company's performance of or compliance with this Agreement,
including without limitation all registration and filing fees, fees
with respect to the filings required to be made with the National
Association of Securities Dealers, Inc., fees and expenses of
compliance with the securities or blue sky laws, printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of
counsel for the Company, fees and disbursements of all independent
certified public accountants of the Company, fees and expenses
incurred in connection with the listing of the securities, rating
agency fees and the fees and expenses of any person, including
special experts, retained by the Company, will be borne by the
Company, regardless of whether the Registration Statement becomes
effective; provided, however, that the Company will not be required
to pay discounts, commissions or fees of underwriters, selling
brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Securities or fees or
disbursements of any other counsel to the Investor.
5.4 Rule 144.
The Company covenants that it will file the reports
required to be filed by it under the 1933 Act and the 1934 Act and
the rules and regulations thereunder, and it will take such further
action as the Investor may reasonably request, all to the extent
required to enable Investor to sell Registrable Securities without
registration under the 1933 Act in reliance on the exemption provided
by Rule 144 or Rule 144A under the 1933 Act or any successor or
similar rules or statues. Upon the request of the Investor, the
Company will deliver to the Investor a written statement as to
whether the Company has complied with such information and
requirements.
6. MISCELLANEOUS.
6.1 SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors
and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this
Agreement.
- -9-
<PAGE>
6.2 GOVERNING LAW. This Agreement shall be governed by
and construed under the laws of the State of California (irrespective
of its choice of law principles).
6.3 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
6.4 TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
6.5 NOTICES. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing
and shall be deemed effectively given upon personal delivery to the
party to be notified, or if sent by telex or telecopier, upon receipt
of the correct answerback, or upon deposit with the United States
Post Office, by registered or certified mail, or upon deposit with an
overnight air courier, in each case postage prepaid and addressed to
the party to be notified at the address as follows, or at such other
address as such party may designate by ten days' advance written
notice to the other party:
If to the Company:
Gensia, Inc.
9360 Towne Centre Drive
San Diego, CA 92121-3030
Attn: Secretary
Fax: (619) 453-0095
with a copy to:
Pillsbury Madison & Sutro
P.O. Box 7880
San Francisco, CA 94104
Attn: Thomas E. Sparks, Esq.
Fax: (415) 983-7396
If to the Investor:
Pfizer Inc.
235 East 42nd Street
New York, NY 10017
Attn: Office of the General Counsel
Fax:
6.6 FINDERS' FEE. Each party represents that it neither
is nor will be obligated for any finders' fee or commission in
connection with this transaction. Investor agrees to indemnify and
hold harmless the Company from any liability for
- -10-
<PAGE>
any commission or compensation in the nature of a finders' fee (and
the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers,
partners, employees or representatives is responsible.
The Company agrees to indemnify and hold harmless
Investor from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending
against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
6.7 EXPENSES. The Company and the Investor shall pay
their respective costs and expenses incurred with respect to the
negotiation, execution, delivery and performance of this Agreement.
If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may
be entitled.
6.8 AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the
Company and the Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of
any securities purchased under this Agreement at the time
outstanding, each future holder of all such securities, and the
Company.
6.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance of
this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
6.10 ENTIRE AGREEMENT. This Agreement, the
Collaborative Research Agreement, and the License and Royalty
Agreement, constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, both oral and written, between
the parties with respect to the subject matter hereof and thereof.
No representation, inducement, promise, understanding, condition or
warranty not set forth herein or therein has been made or relied upon
by either party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
- -11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
GENSIA, INC.
By /s/ Paul K. Laikind
-----------------------------------------
Title Vice President, Corporate Development
--------------------------------------
PFIZER INC.
By /s/ George M. Milne
---------------------
Title President, Central Research
------------------------------
- -12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Consolidated
Balance Sheets at June 30, 1996 (unaudited) and the consolidated Statements of
Operations for the Six Months Ended June 30, 1996 (unaudited) and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 23,907
<SECURITIES> 22,156
<RECEIVABLES> 5,800
<ALLOWANCES> 0
<INVENTORY> 11,725
<CURRENT-ASSETS> 67,506
<PP&E> 44,154
<DEPRECIATION> 15,268
<TOTAL-ASSETS> 104,851
<CURRENT-LIABILITIES> 17,565
<BONDS> 0
0
16
<COMMON> 368
<OTHER-SE> 85,499
<TOTAL-LIABILITY-AND-EQUITY> 104,851
<SALES> 25,679
<TOTAL-REVENUES> 27,761
<CGS> 18,324
<TOTAL-COSTS> 18,324
<OTHER-EXPENSES> 33,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (26,583)<F1>
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,583)<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,583)<F1>
<EPS-PRIMARY> (.74)
<EPS-DILUTED> (.74)
<FN>
<F1>INCLUDES UNDECLARED AND UNPAID DIVIDENDS ON PREFERRED STOCK OF 2,992
</FN>
</TABLE>
