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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
AMENDMENT NO. 1
TO
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT
OF 1934 For the FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934For the transition period from
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to
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COMMISSION FILE NUMBER 0-18549
GENSIA SICOR INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0176647
(State of or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9360 Towne Centre Drive
San Diego, CA 92121
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (619) 546-8300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
Preferred Stock Purchase Rights, Par Value $.01
Warrants to Purchase Common Stock
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. X
---
At March 14, 1997, the aggregate market value of the voting stock held by
nonaffiliates totaled approximately $177.0 million, based on the last sale price
as reported on the Nasdaq National Market.
At March 14, 1997, there were 70,106,966 shares of common stock, $.01 par value,
of the registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(To the extent indicated herein)
None.
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TABLE OF CONTENTS
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PART III
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Item Page
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10. Directors and Executive Officers of the Registrant.................................. 1
11. Executive Compensation.............................................................. 6
12. Security Ownership of Certain Beneficial Owners and Management...................... 11
13. Certain Relationships and Related Transactions...................................... 12
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of Gensia Sicor, Inc. ("Gensia Sicor,"
"Gensia," or the "Company") and their ages as of February 28, 1997 are as
follows:
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NAME AGE Position
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David F. Hale/(1)(2)/ 48 President and Chief Executive Officer
Michael D. Cannon/(3)/ 51 Executive Vice President and Director
Patrick D. Walsh 36 President and Chief Operating Officer, Gensia
Laboratories, Ltd. and Director
Daniel D. Burgess 35 President, Gensia Automedics, Inc.
Wesley N. Fach 45 Secretary
Paul K. Laikind, Ph.D. 41 Vice President, Corporate Development
John W. Sayward 45 Vice President, Finance, Chief Financial Officer and Treasurer
Donald M. Semanisin 47 Vice President, Human Resources
Thomas M. Speace 47 Vice President, Marketing and Business Development, Genesia
Laboratories, Ltd.
Gene F. Tutwiler, Ph.D. 51 Executive Vice President, Research and Development
Donald E. Panoz 62 Chairman of the Board
James C. Blair, Ph.D./(1)(3)(4)(5)/ 57 Director
Jerry C. Benjamin/(1)(4)(5)/ 55 Director
Herbert J. Conrad/(3)(4)(5)/ 64 Director
Carlo Salvi/(1)(2)(4)/ 60 Director
L. John Wilkerson, Ph.D./(1)(2)/ 53 Director
</TABLE>
___________________
(1) Member of the Executive Committee.
(2) Member of the Nominating Committee.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Member of the Stock Option Committee.
Mr. Hale has been President and Chief Executive Officer of the Company
since June 1987 and was Chairman of the Board from May 1991 to February 1997.
Prior to joining the Company, Mr. Hale was President and Chief Executive Officer
of Hybritech Incorporated, a biotechnology company which was acquired by Eli
Lilly & Company in 1986. Mr. Hale joined Hybritech in 1982 as Senior Vice
President of Marketing and Business Development, became Executive Vice President
and Chief Operating Officer later that year, President in 1983 and Chief
Executive Officer in 1986. Before joining Hybritech, Mr. Hale was Vice
President and General Manager of BBL Microbiology Systems, a division of Becton,
Dickinson and Company. Earlier in his career, he held several positions at
or the Pharmaceutical Corporation, a division of Johnson & Johnson, including
Director of the Ortho Dermatological Division and Director of Product
Management. Mr. Hale serves on the board of Dura Pharmaceuticals, Inc.
Mr. Cannon has been a director of the Company and Executive Vice President
of Gensia Sicor since February 1997. Mr. Cannon has served as a member of the
Board of Directors of SICOR-Societa Italiana Corticosteroidi ("Sicor") of Milan,
Italy since its founding in 1983. Sicor is a wholly-owned subsidiary of Rakepoll
Holding, which is owned by Gensia Sicor. From 1986 to 1997 he was Director of
Business Development of Alco
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Chemicals Ltd., Swiss Branch ("Alco") in Lugano, Switzerland, which acts as an
agent and distributor for certain Sicor products. Mr. Cannon worked in a variety
of technical positions at SIRS S.p.A., a manufacturer of bulk corticosteroids in
Milan, Italy from 1970 to 1982.
Mr. Walsh has been a director of the Company since February 1997 and has
been President and Chief Operating Officer of Gensia Laboratories since November
1995. From July 1994 to November 1995, he was Executive Vice President and
Chief Operating Officer of Gensia Laboratories, Ltd. He was Vice President of
Sales and Marketing for Fujisawa U.S.A. from 1991 to 1994. From 1984 to 1991 he
held various sales and marketing positions at Fujisawa U.S.A.
Mr. Burgess was appointed President of Gensia Automedics, Inc. in February
1997. Prior to February 1997, he was Chief Financial Officer and Treasurer of
Gensia, a position he has held since August 1991. He joined Gensia in 1988 and
worked in a number of financial management positions until his promotion to
Chief Financial Officer in 1991. He previously worked for Castle & Cooke, Inc.
as a senior analyst in planning and business development and as a financial
analyst for Smith Barney, Harris Upham & Co. in New York. He received his
masters of business administration from the Harvard Graduate School of Business
Administration.
Dr. Laikind, a co-founder of Gensia, was a Vice President and director
since the Gensia's incorporation from November 1986 until February 1997. He
currently serves as Vice President, Corporate Development. From 1985 to 1987,
Dr. Laikind was an Assistant Research Biochemist at UCSD. From 1984 to 1985,
Dr. Laikind was a Postdoctoral Fellow in the Department of Medicine at UCSD. He
received his doctoral degree in chemistry from UCSD.
Mr. Fach joined Gensia as Assistant General Counsel in January 1992 and was
named Secretary in January 1993. Prior to joining Gensia Mr. Fach was legal
counsel to Marrow-Tech Incorporated (now named Advanced Tissue Sciences, Inc.)
from 1990 to 1992. From 1984 to 1990 he was General Counsel to IMED Corporation
and from 1986 to 1990 he was Assistant General Counsel of its parent company,
Fisher Scientific Group Inc. Mr. Fach received his juris doctor degree from
Columbia University.
Mr. Sayward joined Gensia in 1992 and was named Vice President, Finance,
Chief Financial Officer and Treasurer in February 1997. Prior to that he was
Division Vice President, Finance, Corporate Controller of Gensia and Chief
Financial Officer of Gensia Laboratories. From 1975 to 1992, Mr. Sayward was
employed in a wide variety of financial and accounting positions at Baxter
Healthcare Corporation, serving as Vice President of Finance and Business
Development, I.V. Systems Division from 1988 to 1992. From 1986 to 1988 he was
Vice President and Controller, Dade Diagnostics Division of Baxter. Mr. Sayward
served in a number of financial management positions at Baxter and American
Hospital Supply from 1975 to 1986. He received his master of management from
the Northwestern Kellogg School of Management.
Mr. Semanisin joined Gensia as Vice President, Human Resources in March
1996. From 1986 to 1996 he was President of DSM, Inc., a human resources
consulting firm. From 1979 to 1986 he was Vice President, Human Resources of
Technicare Corporation, a subsidiary of Johnson & Johnson. Mr. Semanisin worked
as a personnel manager at Ohio Carbon Company from 1976 to 1979. He received
his master of science in industrial relations from West Virginia University.
Mr. Speace has been Vice President, Marketing & Business Development,
Gensia Laboratories and an officer of Gensia since May 1996. He joined Gensia
in 1991 as Senior Director of Business Development of Gensia Laboratories,
becoming Executive Director in 1994 and Division Vice President in 1995. Mr.
Speace worked at Kendall McGaw Pharmaceuticals, from 1987 to 1991, when the
company was acquired by Gensia and renamed Gensia Laboratories. Mr. Speace
previously worked at Elkins-Sinn, a division of A.H. Robins and had
responsibility for materials and project management, strategic planning and
business development. He received his masters of business administration from
St. Josephs University in Pennsylvania.
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Dr. Gene F. Tutwiler joined Gensia as Executive Vice President of Research
& Development in June 1996. From 1995 to 1996 he was Vice President, Research &
Development, New Business Development at Alpha Therapeutic Corporation, a
subsidiary of The Green Cross Corporation. From 1991 to 1995 he served as Vice
President, Research and Development, Clinical, Regulatory and Quality Assurance
at Iolab, a subsidiary of Johnson & Johnson. From 1986 to 1991 he served in a
number of senior positions in business development and research management
positions at McNeil Pharmaceuticals, a subsidiary of Johnson & Johnson. Prior
to 1986, Dr. Tutwiler worked at Ayerst Laboratories and McNeil Pharmaceuticals
in basic research and research management. He received a doctoral degree in
biological chemistry from the University of Michigan.
Mr. Panoz has been Chairman of the Board of Directors of the Company since
February 1997. Mr. Panoz was a founder and principal shareholder of Elan
Corporation, plc and was Chairman of the Board from 1970 to December 1996.
Until January 1995, he held the position of Chief Executive Officer of Elan.
Mr. Panoz was a founder of Mylan Laboratories and served as its President from
1960 to 1969. Mr. Panoz is executive chairman of Fountainhead Holdings Ltd. (an
investment holding company) and of Fountainhead Development Corp., Inc., its
principal U.S. operating subsidiary. He also serves as non-executive chairman
of Warner Chilcott, plc (formerly Nale Laboratories, plc).
Dr. Blair has been a director of the Company since 1986 and was Chairman of
the Board of the Company from 1986 to May 1991 and Vice Chairman of the Board
from May 1991 to March 1997. He has been a General Partner of Domain
Associates, a venture capital management company, since 1985. Previously, Dr.
Blair was employed in venture capital management, investment research and
engineering management. He holds a doctoral degree in engineering from the
University of Pennsylvania. Dr. Blair is also a director of Amylin
Pharmaceuticals, Inc., Aurora Biosciences Corporation, CoCensys, Inc., Dura
Pharmaceuticals, Inc., Houghten Pharmaceuticals, Inc. and Vista Medical
Technologies, Inc.
Mr. Benjamin has been a director of the Company since 1987. He has been a
General Partner of Advent Limited, a venture capital management firm in London,
England, since 1985. Prior to that he was employed for 18 years with Monsanto
Corporation in various executive management positions. Mr. Benjamin is a
Director of Biomagnetic Technologies, Inc., Dura Pharmaceuticals, Inc. and
Orthofix International N.V.
Mr. Conrad has been a director of the Company since September 1993. From
April 1988 to August 1993, Mr. Conrad was President of the Pharmaceuticals
Division, and Senior Vice President, of Hoffmann-La Roche Inc. Mr. Conrad was a
member of the Board of Directors of Hoffmann-La Roche and a member of its
Executive Committee from December 1981 through August 1993. Mr. Conrad joined
Hoffmann-La Roche in 1960 and held various positions over the years including
Senior Vice President of the Pharmaceuticals Division, Chairman of the Board of
Medi-Physics, Inc. and Vice President, Public Affairs and Planning Division.
Mr. Conrad is also a director of Biotechnology General Corp. and Dura
Pharmaceuticals, Inc.
Mr. Salvi has been a director of the Company and Chairman of the Company's
executive operating committee since February 1997. Additionally, since February
1997 Mr. Salvi has served as a Chairman of the Board of Directors and President
of Sicor. From September 1995 to the present he has been a consultant to Alco
in Lugano, Switzerland. From 1986 to September 1995, he was a general manager of
Alco.
Dr. Wilkerson has been a director of the Company since May 1991. Dr.
Wilkerson was Chairman of the Board of The Wilkerson Group, a healthcare
products consulting firm, from 1982 until May 1996 and currently he is a
consultant to The Wilkerson Group. Prior to joining The Wilkerson Group, Dr.
Wilkerson was a Vice President and partner responsible for medical supply
security analysis and research at Smith Barney, Harris, Upham & Co. Dr.
Wilkerson is also a director of British Bio-Technology Corporation, plc and
several private companies. He received his doctorate from Cornell University.
The Company's Board of Directors is divided into three classes. The Board
is comprised of three Class I directors (Mr. Panoz, Mr. Cannon and Mr. Walsh),
three Class II directors (Mr. Benjamin, Mr. Salvi and
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Dr. Wilkerson) and four Class III directors (Dr. Blair, Messrs. Conrad and Hale
and one vacancy). Currently one Class III director's seat is vacant. At each
annual meeting of stockholders, a class of directors is elected for a three-year
term to succeed the directors of the same class whose term is then expiring. The
terms of the current Class I directors, Class II directors and Class III
directors, respectively, will expire upon the election and qualification of
directors at the annual meeting of stockholders held in 1999, 1997 and 1998,
respectively.
COMPOSITION OF BOARD OF DIRECTORS
On February 28, 1997, pursuant to a Stock Exchange Agreement, dated as of
November 12, 1996, as amended on December 16, 1996 (the "Stock Exchange
Agreement"), between Gensia, Inc. ("Gensia," currently Gensia Sicor) and
Rakepoll Finance N.V., a corporation organized under the laws of the Netherlands
Antilles ("Rakepoll Finance"), Gensia acquired all of the outstanding shares of
capital stock of Rakepoll Holding B.V., a corporation organized under the laws
of the Netherlands ("Rakepoll Holding") and a wholly-owned subsidiary of
Rakepoll Finance, in exchange for 29,500,000 shares of Gensia common stock, $.01
par value ("Gensia Common Stock") and $100,000 in cash (the "Stock Exchange").
See Item 13. "Certain Relationships and Related Transactions." In connection
with the Stock Exchange Agreement, Gensia and Rakepoll Finance entered into the
Shareholder's Agreement concerning the governance of the Company after the
acquisition and certain other matters concerning the acquisition and disposition
of Gensia securities by Rakepoll Finance and its affiliates. Carlo Salvi is the
controlling beneficial owner of Rakepoll Finance.
The Shareholder's Agreement specifies that, effective as of February 28,
1997 (the "Closing Date"), the Company is to have a ten member Board of
Directors (to be expanded to twelve members in the event that holders of Gensia
Sicor's Convertible Preferred Stock (other than Rakepoll Finance and its
affiliates) in accordance with the terms of the Convertible Preferred Stock,
become entitled to appoint two directors). At the Closing Date, the Gensia Sicor
Board was to consist of (i) two directors who are executive officers of Gensia
and not affiliated with Rakepoll Finance ("Management Directors"), (ii) three
directors designated by Rakepoll Finance ("Investor Directors") and (iii) five
independent directors to be designated jointly by the Management Directors and
the Investor Directors (the "Independent Directors"). The initial directors were
David Hale and Patrick Walsh as Management Directors; Carlo Salvi and Michael
Cannon as Investor Directors; and James Blair, Jerry Benjamin, Herbert Conrad,
Steven Mendell and L. John Wilkerson as the five Independent Directors. Messrs.
Benjamin, Conrad, Mendell and Hale and Drs. Blair and Wilkerson were Gensia
directors prior to the Closing Date. Prior to the Closing Date, the
Shareholder's Agreement was amended to add Donald Panoz as an Independent
Director, provide for a current independent director to resign by March 10, 1997
and to permit an Investor Director to be appointed in the future. Mr. Mendell
resigned from the Board of Directors on March 10, 1997.
During the term of the Shareholder's Agreement, the number of Investor
Directors that Rakepoll Finance will be entitled to designate will vary
according to its ownership interest in Gensia as a percentage of its Initial
Interest. See Item 12. "Security Ownership of Certain Beneficial Owners and
Management." If Rakepoll Finance's ownership interest in Gensia Sicor is (i) 50%
or above of its Initial Interest, Rakepoll Finance shall have the right to
designate for nomination and approval three Investor Directors; the Management
Directors shall have the right to designate for nomination and approval two
Management Directors; and the five Independent Directors shall be designated for
nomination and approval jointly by the Management Directors and the Investor
Directors; (ii) 25% or above but less than 50% of its Initial Interest, Rakepoll
Finance shall have the right to designate for nomination and approval two
Investor Directors; and there shall be four Independent Directors who shall be
designated for nomination and approval jointly by the Management Directors and
the Investor Directors; (iii) 10% or above but less than 25% of its Initial
Interest, Rakepoll Finance shall have the right to designate for nomination and
approval one Investor Director; and there shall be three Independent Directors
who shall be designated for nomination and approval jointly by the Management
Directors and the Investor Directors. Once Rakepoll Finance's interest has
fallen below 10% of its Initial Interest, Rakepoll Finance shall have no further
right to designate any Investor Directors or Independent Directors and the
Management Directors shall have no right to designate any Management Directors
or Independent Directors.
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If at any time Rakepoll Finance's ownership interest in Gensia Sicor should be
reduced with the result that, in accordance with the provisions described in the
foregoing paragraph, the number of directors which Rakepoll Finance is entitled
to designate is reduced, then such entitlement reduction shall extinguish any
right Rakepoll Finance might have under the Shareholder's Agreement to designate
a greater number of directors, notwithstanding any increase in Rakepoll
Finance's ownership in Gensia Sicor which may occur after such entitlement
reduction.
The Shareholder's Agreement further specifies that vacancies on the Gensia
Sicor Board of Directors which result from a reduction in Rakepoll Finance's and
the Management Directors' entitlement to designate directors in accordance the
terms of the Shareholder's Agreement shall be filled by election by the
stockholders at large of Gensia Sicor in accordance with applicable law, Gensia
Sicor's Certificate of Incorporation and its Bylaws.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) under the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), the Company's directors and executive officers, and any
persons holding more than 10% of the Company's Common Stock, are required to
report their initial ownership of the Company's Common Stock and any subsequent
changes in that ownership to the Securities and Exchange Commission. Specific
due dates for these reports have been established and the Company is required to
identify in this document those persons who failed to timely file these reports.
All of the filing requirements were satisfied for 1996.
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ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Information is set forth below concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 1994, 1995, and 1996, of those persons who were at December
31, 1996 (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 (the "Named Executive Officers"). Mr. Hale's base salary for 1997 has
been set at the same level as his 1996 base salary. Mr. Burgess resigned as
Vice President, Finance, Chief Financial Office and Treasurer effective February
26, 1997 in connection with his appointment as President of Gensia Automedics
Inc. Mr. Hale resigned as Chairman of the Board effective February 25, 1997.
SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION LONG TERM COMPENSATION
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AWARDS
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NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS UNDERLYING COMPEN-
POSITION YEAR ($) ($) ($) ($) OPTION (#) SATION ($)
- --------------------------- ---- -------- ------- ------------- ------------ ------------ -------------
David F. Hale 1996 $450,000 - - - - $20,300/(2)/
President, Chief 1995 $450,000 $50,800 - $149,625/(1)/ 75,000 $19,200/(2)/
Executive Officer 1994 $450,000 - - - 200,000/(3)/ $14,100/(2)/
and Chairman of the
Board
Patrick D. Walsh 1996 $208,000 - $60,100 - - $ 2,800/(5)/
President and Chief 1995 $185,000 $35,800 $53,500/(4)/ $59,850/(1)/ 25,000 $ 1,500/(5)/
Operating Officer of Gensia 1994 $ 89,400 - $65,500/(4)/ $72,975/(6)/ 65,000/(7)/ $ 300/(5)/
Laboratories, Ltd.
Daniel D. Burgess 1996 $175,000 - - - - $22,600/(8)/
Vice President, Finance, 1995 $160,000 $40,800 - $59,850/(1)/ 15,000 $22,400/(8)/
Chief Financial Officer and 1994 $152,500 - - $72,975/(6)/ 65,000/(9)/ $ 2,300/(8)/
Treasurer
Paul K. Laikind 1996 $160,000 - $3,000 - - $ 3,500/(10)/
Vice President, Corporate 1995 $145,000 $25,800 $3,000 $59,850/(1)/ 15,000 $ 3,400/(10)/
Development 1994 $145,000 - $3,000 $72,975/(6)/ 65,000/(11)/ $ 3,100/(10)/
Gene F. Tutwiler, Executive 1996 $ 95,700 $40,000 $ 99,020/(12)/ $75,795/(13)/ 40,000 $ 2,900/(14)/
Vice President, Research 1995 - - - - - -
and Development 1994 - - - - - -
</TABLE>
(1) Represents the aggregate of the fair market value of the shares of
restricted stock as of the date of grant ($4.00 per share) less the
aggregate consideration paid therefor ($.01 per share). In December 1995,
the Company's Board of Directors determined that in order to encourage its
employees, including officers, to continue to play a key role in building
long-term value at the Company, it should provide such employees with an
additional restricted stock award as an incentive to stay at the Company
and assist in creating this value. The Board of Directors then authorized
certain employees, including officers, the opportunity to exchange certain
of their outstanding stock options for restricted stock awards. In
addition, each such employee who elected to exchange his or her options was
granted additional restricted stock awards for a number of shares equal to
two times the number of shares which had been exchanged. Accordingly,
Messrs. Hale, Burgess, Laikind and Walsh each had the right to purchase
restricted shares of Common Stock of the Company for a nominal cash
purchase price equal to the par value of the stock ($.01 per share) in
exchange for certain options held by each. The restricted shares vested in
full on January 31, 1997. Mr. Hale received an award of 37,500 shares of
restricted stock and each of Messrs. Burgess, Laikind, and Walsh received
an award of 15,000 shares of restricted stock. The aggregate number and
value of all restricted shares held by Mr. Hale at December 31, 1996 were
37,500 and $173,100, respectively. The aggregate number and value of all
restricted shares held by each of Messrs. Burgess, Laikind and Walsh at
December 31, 1996 were 45,000 and $207,675 respectively.
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(2) Represents $9,100, $14,700, and $15,800, the respective amounts paid by the
Company for long-term disability insurance premiums for Mr. Hale in 1994,
1995, and 1996, and $5,000, $4,500 and $4,500, the respective amounts paid
by the Company for life insurance premiums for Mr. Hale in 1994, 1995, and
1996.
(3) Includes options to purchase 150,000 shares of the Company's Common Stock
at exercise prices greater than $4.875 which were canceled in October 1994
in exchange for an option to purchase 150,000 shares of the Company's
Common Stock at an exercise price of $4.875 per share, the fair market
value on the date of grant.
(4) Represents $53,000 and $65,500, the respective amounts paid by the Company
to Mr. Walsh for expenses in connection with his relocation to San Diego in
1994 and 1995, and includes payments to Mr. Walsh for taxes he incurred on
certain relocation expenses. The respective amounts of relocation
reimbursement and tax reimbursement for 1994 are $45,500 and $20,000. The
respective amounts of relocation reimbursement and tax reimbursement for
1995 are $32,500 and $21,000.
(5) Represents $1,000 and $2,000 paid by the Company for long-term disability
insurance premiums for Mr. Walsh in 1995 and 1996 and $300, $500 and $800,
the respective amounts paid by the Company for certain life insurance
premiums for Mr. Walsh in 1994, 1995, and 1996.
(6) Represents the aggregate of the fair market value of the shares of
restricted stock as of the date of grant ($4.875 per share) less the
aggregate consideration paid therefor ($.01 per share). As of October 29,
1994, officers and certain employees were given the opportunity to exchange
certain of their outstanding stock options for restricted stock awards.
Accordingly, Messrs. Walsh, Laikind and Burgess each had the right to
purchase restricted shares of Common Stock of the Company for a nominal
cash purchase price equal to the par value of the stock ($.01 per share) in
exchange for certain options held by each. The restricted shares vested in
full on March 31, 1996. Each of Mesrs. Walsh, Laikind and Burgess received
an award of 15,000 shares of restricted stock.
(7) Includes options to purchase 25,000 shares of the Company's Common Stock at
exercise prices greater than $4.875 which were canceled in October 1994 in
exchange for an option to purchase 25,000 shares of the Company's Common
Stock at an exercise price of $4.875 per share, the fair market value on
the date of grant.
(8) Represents $1,900, $1,900 and $2,000, the respective amounts paid by the
Company for long-term disability insurance premiums for Mr. Burgess in
1994, 1995 and 1996, and $400, $500, and $600, the respective amounts paid
by the Company for certain life insurance premiums for Mr. Burgess in 1994,
1995 and 1996. For 1995 and 1996, also represents certain indebtedness of
Mr. Burgess forgiven by the Company in the amount of $20,000 each year.
(9) Includes options to purchase 30,000 shares of the Company's Common Stock at
exercise prices greater than $4.875 which were canceled in October 1994 in
exchange for an option to purchase 30,000 shares of the Company's Common
Stock at an exercise price of $4.875 per share, the fair market value on
the date of grant.
(10) Represents $2,600, $2,600 and $2,700, the respective amounts paid by the
Company for long-term disability insurance premiums for Dr. Laikind in
1994, 1995 and 1996, and $500, $800, and $900, the respective amounts paid
by the Company for certain life insurance premiums for Dr. Laikind in 1994,
1995 and 1996.
(11) Includes options to purchase 25,000 shares of the Company's Common Stock at
exercise prices greater than $4.875 which were canceled in October 1994 in
exchange for an option to purchase 25,000 shares of the Company's Common
Stock at an exercise price of $4.875 per share, the fair market value on
the date of grant.
(12) Represents $64,000 paid by the Company to Dr. Tutwiler for expenses in
connection with his relocation to San Diego in 1996 and $35,100 in
taxes he incurred on certain relocation expenses.
(13) Represents the aggregate of the fair market value of the shares of
restricted stock as of the date of grant ($5.063 per share) less the
aggregate consideration paid therefor ($.01 per share). On June 25, 1996,
the Company's Board of Directors authorized an award of 15,000 shares of
restricted stock to Dr. Tutwiler. The restricted shares vested in full on
February 28, 1997 due to a change in control of the Company. The aggregate
number and value of all restricted shares held by Dr. Tutwiler at December
31, 1996 were $15,000 and $69,225, respectively.
(14) Represents $1,400, the amount paid by the Company for long-term disability
insurance premiums for Mr. Tutwiler in 1996, and $1,500, the amount paid by
the Company for certain life insurance premiums for Mr. Tutwiler in 1996.
COMPENSATION OF DIRECTORS
The members of the Board of Directors who are not employees of the Company
(other than Mr. Panoz and Mr. Salvi) receive an annual retainer of $10,000 and
they are reimbursed for reasonable expenses incurred in connection with meetings
of the Board of Directors and its committees. In addition, continuing non-
employee directors
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receive automatic grants of options to purchase 7,500 shares of the Company's
Common Stock at the conclusion of each annual meeting of stockholders. Non-
employee directors will receive a one-time grant of options to purchase 25,000
shares of the Company's Common Stock.
In connection with Donald Panoz agreeing to act as the non-executive
Chairman of the Board of the Company and to provide certain other services to
the Company, the Company agreed to pay an annual fee of $200,000 for two years
and granted Mr. Panoz options to purchase 500,000 shares of the Company's Common
Stock at an exercise price of $4.288 per share. Of these options, 200,000
shares are fully vested, and the remaining 300,000 shares will vest in
increments of 100,000 shares for each $100,000,000 increase in the Company's
market capitalization, prior to February 28, 2000, over $700,000,000. The
agreement may be terminated by either party on 30 days' advance notice in
writing, however if the Company terminates, it will pay Mr. Panoz the difference
between $200,000 and any amounts previously paid. In addition, if Mr. Panoz'
agreement is not earlier terminated and the Company's market capitalization,
prior to February 28, 2000, exceeds $1,000,000,000, Mr. Panoz will be paid a
bonus of $1,000,000, payable in equal annual installments over a ten-year
period, in cash or, at the option of the Company, in stock of the Company.
Carlo Salvi, as Chairman of the Board of Sicor is entitled to receive Lit.
100,000,000 (approximately $59,000) per year. Michael Cannon, as a member of
the Sicor Board of Directors, is entitled to Lit. 15,000,000 (approximately
$12,000).
SEVERANCE AGREEMENTS
The Company is a party to certain Severance Agreements (the "Severance
Agreements") with the chief executive officer and each of the Named Executive
Officers and certain other officers and key employees. Pursuant to the
Severance Agreements, (i) if, within the first 12-month period after the
occurrence of a "Change in Control" of the Company, (a) the officer voluntarily
resigns for "Good Reason" or (b) the Company terminates the officer's employment
for any reason other than "Cause" or "Disability," or (ii) if the Company
terminates the officer's employment because his position has been eliminated in
connection with a restructuring or reduction in force, as determined by the
Company, the officer will be entitled to receive a severance payment during the
"Continuation Period" at an annual rate equal to the sum of (i) the employee's
base compensation at the annual rate in effect on the date when the termination
of his employment with the Company is effective plus (ii) the arithmetic mean of
the employee's annual bonuses for the last three calendar years completed prior
to the date when the termination of his employment with the Company is
effective. Further, the Continuation Period is treated as employment for
purposes of determining the employee's vesting in any stock options and shares
of restricted stock granted to him by the Company.
The "Continuation Period" is defined (except with respect to Mr. Hale's
Severance Agreement) as the period commencing on the effective date of the
employee's termination of employment and ending on the earlier of (i) the date
nine months after the date when the employment termination was effective or (ii)
the date of the employee's death. If, however, the employee is not employed in
a new position comparable to his position with the Company on the date nine
months after his employment termination was effective, then the Continuation
Period is extended to the date when the employee becomes employed in such a
position, but in no event by more than three months. With respect to Mr. Hale
only, the Continuation Period is defined as the period commencing on the
effective date of Mr. Hale's termination of employment and ending on the earlier
of (i) 18 months after the date when the employment termination was effective or
(ii) the date of Mr. Hale's death.
"Change in Control" is defined as the occurrence of any of the following
events: (i) the first purchase of shares of the Company's Common Stock pursuant
to a tender offer or exchange offer (other than an offer by the Company) for
all, or any part, of such Common Stock; (ii) any acquisition of voting
securities of the Company by any person or group, which theretofore did not
beneficially own voting securities, representing more than 30% of the voting
power of all outstanding voting securities of the Company, if such acquisition
results in such entity, person or group owning beneficially securities
representing more then 30% of the voting power of all outstanding voting
securities of
-8-
<PAGE>
the Company; (iii) approval by the Company's stockholders of a merger in which
the Company does not survive as an independent publicly-owned corporation, a
consolidation, or a sale, exchange or other disposition of all, or substantially
all, of the Company's assets; or (iv) a change in the composition of the
Company's Board of Directors during any period of two consecutive years such
that individuals who at the beginning of such period were members of the Board
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's stockholders, of each
new Director was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of the period.
"Good Reason" means that the employee: (i) has been demoted or has
incurred a material reduction in his authority or responsibility as an employee
of the Company; (ii) has incurred a reduction in his total compensation
(including benefits) as an employee of the Company; (iii) has not received a
contemporaneous increase in his total compensation (including benefits) which is
commensurate with increases in total compensation (including benefits) received
by a majority of executive-level employees of the Company with duties and
responsibilities substantially comparable to those of the employee; (iv) has not
received a bonus commensurate with bonuses (if any) received by a majority of
executive-level employees of the Company with duties and responsibilities
substantially comparable to those of the employee; or (v) has been notified that
his principal place of work as an employee of the Company will be relocated by a
distance of 50 miles or more.
"Cause" means (i) a willful act by the employee which constitutes
misconduct or fraud and which is injurious to the Company or (ii) conviction of,
or a plea of "guilty" or "no contest" to, a felony.
STOCK OPTIONS
The following tables summarize option grants and exercises during fiscal
1996 to or by the chief executive officer and the Named Executive Officers, and
the value of the options held by such persons at the end of fiscal 1996. The
Company does not grant Stock Appreciation Rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
STOCK APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTIONS TERM(2)
-------------------------------------------------------------------- ------------------------
NUMBER OF $ OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR 1996 PRICE($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------------- ---------- ---------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
David F. Hale, - - - - - -
Chief Executive
Officer
Patrick D. Walsh - - - - - -
Daniel D. Burgess - - - - - -
Paul K. Laikind - - - - - -
Gene F. Tutwiler 40,000 4.7% $5.063 6/28/06 $127,364 $322,765
</TABLE>
______________
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<PAGE>
(1) Generally, options become exercisable ratably on a daily basis over a four-
year period and vest in full in the event of a change in control with
respect to the Company and in the event of the death of the optionee. As a
result of the Stock Exchange, all options automatically vested on February
28, 1997. The exercise price per share of options granted in 1995
represented the fair market value of the underlying shares on the date of
grant. Generally, options granted have a term of 10 years, subject to
earlier termination in certain events related to termination of employment.
(2) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND VALUE OF OPTIONS
AT END OF FISCAL 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXCERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT END OF OPTIONS AT END OF
FISCAL 1996 (#) FISCAL 1996 ($)/(1)/
SHARES ACQUIRED VALUE ----------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------- --------------- ----------------------- ----------------------------- -------------------------
<S> <C> <C> <C> <C>
David F. Hale, - - 378,523/68,977 $278,379/$43,471
Chief Executive
Officer
Patrick D. Walsh - - 19,169/25,831 $ 2,812/$7,938
Daniel D. Burgess - - 60,036/22,464 $ 20,709/$7,011
Paul K. Laikind - - 63,815/18,685 $ 32,889/$7,011
Gene F. Tutwiler - - 0/40,000 $ 0/$0
</TABLE>
(1) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1996 ($4.63), minus the exercise price.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 15, 1997, as to
shares of Common Stock beneficially owned by (i) each director, (ii) the
officers of the Company named in the Summary Compensation Table set forth
herein, (iii) the directors and executive officers of the Company as a group and
(iv) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock of the Company. Except as otherwise
indicated and subject to applicable community property laws, each person has
sole investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective individuals or
entities, as the case may be.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
---------------------------------
NUMBER OF PERCENT
SHARES/(1)/ OF CLASS/(2)/
---------------- --------------
<S> <C> <C>
Rakepoll Finance N.V................... 29,500,000 39.7%
J.B. Gorsiraweg,
Curacao, Netherlands Antilles
Carlo Salvi............................ 30,090,000/(3)/ 40.5
Donald E. Panoz........................ 650,000/(4)/ *
Michael D. Cannon...................... 0 *
David F. Hale.......................... 1,046,310/(5)/ 1.4
Jerry C. Benjamin...................... 32,500/(6)/ *
James C. Blair......................... 126,568/(7)/ *
Herbert J. Conrad...................... 24,345/(8)/ *
Patrick D. Walsh...................... 80,763/(9)/ *
L. John Wilkerson...................... 72,312/(10)/ *
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
-------------------------------
NUMER OF PERCENT
SHARES/(1)/ OF CLASS/(2)/
---------------------------------
<S> <C> <C>
Daniel D. Burgess...................... 125,428/(11)/ *
Paul K. Laikind........................ 412,554/(12)/ *
Gene F. Tutwiler....................... 57,197/(13)/ *
All directors and executive officers
as a group (16 persons)............. 32,605,644/(14)/ 43.9%
----------------
- --------------
*Less than one percent.
</TABLE>
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, shares
which such person or group has the right to acquire within 60 days after
such date are deemed to be outstanding, but are not deemed to be
outstanding for the purposes of computing the percentage ownership of
any other person.
(3) Includes 29,500,000 shares owned by Rakepoll Finance, a majority-owned
direct subsidiary of Korbona Industries Ltd., which is wholly-owned by
Mr. Salvi. Also includes 440,000 shares owned by Nora Real Estate S.A.
and 50,000 shares owned by Alco Chemicals Ltd., both of which are
wholly-owned by Mr. Salvi.
(4) Includes 200,000 shares Mr. Panoz has the right to acquire within 60
days of April 15, 1997 pursuant to the exercise of options. Includes
300,000 shares which Mr. Panoz may have the right to acquire within 60
days of April 15, 1997 pursuant to the exercise of options that vest
upon the attainment of certain corporate objectives.
(5) Includes 508,000 shares held by a trust as to which Mr. Hale has shared
voting and investment power, 54,000 shares held by Mr. Hale as custodian
for his minor children as to which Mr. Hale has sole voting and
investment power, and 350,579 shares which Mr. Hale has the right to
acquire within 60 days of April 15, 1997 pursuant to the exercise of
options and warrants.
(6) Includes 30,500 shares Mr. Benjamin has the right to acquire within 60
days of April 15, 1997 pursuant to the exercise of options.
(7) Includes 14,750 shares which Dr. Blair has the right to acquire within
60 days of April 15, 1997 pursuant to the exercise of options and
warrants. Includes 1,125 shares beneficially owned by Domain Partners,
L.P. Dr. Blair is a General Partner of One Palmer Square Associates,
L.P., the general partner of Domain Partners, L.P. Includes 50,000
shares which Domain Partners III, L.P. has the right to acquire within
60 days of April 15, 1997. Dr. Blair is a General Partner of One Palmer
Square Associates III, L.P., the general partner of Domain Partners III,
L.P. Dr. Blair has an indirect beneficial interest in these shares.
Includes 1,509 shares beneficially owned by Domain Associates Profit
Sharing Plan. Includes 4,125 shares which Domain Associates has the
right to acquire within 60 days of April 15, 1997 pursuant to the
exercise of warrants. Dr. Blair is a General Partner of Domain
Associates.
(8) Includes 25,392 shares which Mr. Conrad has the right to acquire within
60 days of April 15, 1997 pursuant to the exercise of options.
(9) Includes 55,130 shares which Mr. Walsh has the right to acquire within
60 days of April 15, 1997 pursuant to the exercise of options.
(10) Includes 2,062 shares which Dr. Wilkerson has the right to acquire
within 60 days of April 15, 1997 pursuant to the exercise of warrants.
Includes 41,250 shares owned by Longbow Partners and 20,250 shares which
Longbow Partners has the right to acquire within 60 days of April 15,
1997 pursuant to the exercise of options. Longbow Partners is a
partnership of which the partners are certain shareholders of The
Wilkerson Group. Dr. Wilkerson disclaims beneficial ownership of the
shares and options held by Longbow Partners. Dr. Wilkerson is a
consultant to The Wilkerson Group.
(11) Includes 81,039 shares which Mr. Burgess has the right to acquire within
60 days of April 15, 1997 pursuant to the exercise of options.
(12) Includes 76,013 shares which Dr. Laikind has the right to acquire within
60 days of April 15, 1997 pursuant to the exercise of options.
(13) Includes 41,013 shares which Dr. Tutwiler has the right to acquire
within 60 days of April 15, 1997 pursuant to the exercise of options.
-11-
<PAGE>
(14) Includes 1,174,599 shares which may be acquired within 60 days of April
15, 1997 pursuant to the exercise of options and warrants. Includes
562,000 shares held by trusts for the benefit of family members of
directors and officers as to which such directors and officers have
voting and investment power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE STOCK EXCHANGE
On February 26, 1997 the stockholders of Gensia approved a Stock Exchange
Agreement, dated as of November 12, 1996, as amended on December 16, 1996 (the
"Stock Exchange Agreement"), between Gensia and Rakepoll Finance pursuant to
which, Gensia acquired all of the outstanding shares of capital stock of
Rakepoll Holding, a wholly-owned subsidiary of Rakepoll Finance, in exchange for
29,500,000 shares of Gensia Common Stock and $100,000 in cash (the "Stock
Exchange"). As a result of the Stock Exchange, Rakepoll Holding became a wholly-
owned subsidiary of Gensia. Rakepoll Holding is a Netherlands holding company
which owns a group of three specialty pharmaceutical companies (the "Rakepoll
Operating Group") comprised of a company located in Milan, Italy, Sicor, and two
companies located in Mexico, Lemery, S.A. de C.V. ("Lemery"), and Sintesis
Lerma, S.A. de C.V. ("Sintesis Lerma"). Sicor and Sintesis Lerma manufacture
specialty bulk drug substances. Lemery produces oral and injectable finished
multisource drug products (also called finished dosage forms) utilizing
specialty bulk drug substances produced by the other companies in the Rakepoll
Operating Group and/or purchased from third parties. The specialty bulk drug
substances manufactured by the Rakepoll Operating Group are almost entirely
destined for parenteral or topical administration, including inhalation therapy,
and almost all belong to one of three categories: (i) oncolytic agents, (ii)
steroids or (iii) non-depolarizing muscle relaxants.
In addition, pursuant to the Shareholder's Agreement, if Rakepoll Finance
maintains certain ownership levels, Rakepoll Finance will be entitled to
designate three of Gensia's 10 directors who will in turn designate (jointly
with two executive officer directors of Gensia) five additional directors. The
Shareholder's Agreement further granted to Rakepoll Finance the right to
initially designate a majority of the directors and the senior managers of each
of Sicor, Sintesis Lerma and Lemery, and grants to the Investor Directors the
right to nominate for the consideration of the Gensia Sicor Board of Directors
replacements for all directors and senior managers so designated. The Management
Directors are entitled to designate the balance of the directors and senior
managers of each such company. Each such director and senior manager shall serve
at the pleasure of the Board of Directors of Gensia Sicor. Additionally, with
respect to Gensia Laboratories, the Shareholder's Agreement names the members of
its initial Board of Directors and provides that Rakepoll Finance shall have the
right to designate one of the directors thereof.
The Shareholder's Agreement provides that, at the Closing Date (i) an
Independent Director (Donald Panoz) shall serve as the non-executive Chairman of
the Gensia Board of Directors, (ii) David F. Hale shall serve as President and
Chief Executive Officer of Gensia and (iii) Michael D. Cannon shall serve as
Executive Vice President of Gensia. The Shareholder's Agreement further provides
for the creation of an Executive Operating Committee, which shall be a
management committee and not a committee of the Board of Directors of Gensia,
consisting of Carlo Salvi (who shall serve as the Executive Operating
Committee's Chairman), the President and Chief Executive Officer of Gensia, the
President of Gensia Laboratories and the Executive Vice President of Gensia.
Pursuant to the Shareholder's Agreement, the consent of the Investor
Directors will be required for Gensia to take certain actions, such as a merger
or sale of all or substantially all of the business or assets of Gensia and for
certain issuances of securities. The Shareholder's Agreement also grants
certain anti-dilution privileges to Rakepoll Finance and places limitations on
Rakepoll Finance's ability to acquire or dispose of any Gensia Sicor Common
Stock for one year from the Closing Date.
As a result of the Stock Exchange all options to acquire Gensia Common
Stock held by each of the executive officers and directors of Gensia became
fully vested upon the consummation of the Stock Exchange.
-12-
<PAGE>
In addition because the Stock Exchange constituted a change in control, pursuant
to agreements Gensia had executed with its officers and certain key employees of
Gensia, including David Hale, President and Chief Executive Officer of Gensia,
each such individual is entitled to certain benefits, including salary
continuation and healthcare coverage upon, within a certain period of time,
their resignation for good reason, including, without limitation, changes in job
authority or responsibility or employer's physical location, or termination of
their employment for other than cause or disability. Also, in November 1996, the
Gensia Board of Directors (with Mr. Hale not present) agreed to forgive, upon
consummation of the Stock Exchange, a loan made by Gensia to Mr. Hale in April
1995, upon terms to be determined by Gensia's Compensation Committee. The
outstanding principal and interest on such loan was approximately $150,000. In
addition, Gensia and Rakepoll Finance have each agreed to cause Gensia Sicor to
(a) maintain and perform in the same manner as prior to the execution date of
the Stock Exchange Agreement Gensia's existing indemnification provisions with
respect to its present and former directors and officers for acts or omissions
or alleged acts or omissions occurring at or prior to the Closing Date, subject
to certain limitations, (b) to provide, maintain and perform in the same manner
as prior to the execution date of the Stock Exchange Agreement Gensia's existing
indemnification provisions with respect to its present and future directors and
officers for acts or omissions or alleged acts or omissions occurring after the
Closing Date, subject to certain limitations, and (c) maintain for a period of
no less than three years after the Closing Date, directors and officers
liability coverage with limits, terms and conditions no less advantageous than
Gensia had in effect as of the execution date of the Stock Exchange Agreement.
The Gensia Board of Directors was aware of these interests and took these
interests into account in approving the Stock Exchange Agreement and the
transactions contemplated thereby, including the Stock Exchange and the
Shareholder's Agreement.
Mr. Salvi is the beneficial owner of a majority of Rakepoll Finance.
RELATIONSHIP WITH GENSIA CLINICAL PARTNERS
In July 1991, the Company organized Gensia Clinical Partners to provide
funding for further research and clinical development of the Company's
GenESA/(R)/ System technology. Gensia Clinical Partners received net proceeds
of approximately $23.0 million from its limited partners, all of which has been
paid to the Company pursuant to a research and development contract. Gensia
Development Corporation, a wholly-owned subsidiary of the Company, is the sole
general partner of Gensia Clinical Partners.
The Company has granted Gensia Clinical Partners an exclusive royalty-free
license to use certain patent rights and technology that are related to the
GenESA System in the United States, Canada and Europe. Under its development
and marketing agreement with Gensia Clinical Partners, the Company conducts
research and development relating to the GenESA System, and Gensia Clinical
Partners reimbursed the Company for these services through May 1993. The full
amount of proceeds from the partnership has now been utilized and the Company is
funding all further expenses related to the GenESA System. The Company is
obligated under the agreements to market the GenESA System in the United States,
Canada and certain countries in Europe, if approved by regulatory authorities in
these countries, and to pay royalties based on those sales. In addition, the
Company is required to make a milestone payment of approximately $5 million
payable in cash or Common Stock of the Company upon approval of the GenESA
System by the United States Food and Drug Administration.
During the two to four-year period following the initial commercialization
of the GenESA System, the Company has the option to purchase the limited
partners' interests in Gensia Clinical Partners. If the Company exercises this
option, it will pay the limited partners approximately $22 million payable in
cash or shares of Common Stock of the Company (the "Advance Payment"), and a
royalty on product sales of the GenESA System for an eleven-year period
following the purchase of the interests. At a limited partner's option, in lieu
of the right to receive the Advance Payment and royalty, a limited partner may
elect to receive a predetermined number of shares of Common Stock of the
Company. If all limited partners were to elect this option, the Company would
issue 1,976,250 shares of Common Stock of the Company (and would not be required
to make the Advance Payment or pay any royalty). In return for the option to
purchase the partnership interests in Gensia Clinical
-13-
<PAGE>
Partners, the Company issued warrants to the limited partners to purchase
2,249,175 shares of Common Stock of the Company. If Gensia fails to exercise its
option, the Company will lose all rights to the GenESA System in the United
States, Canada and Europe.
The Company plans to continue to fund the development of the GenESA System
using internally available funds. The Company contributed approximately $3.2
million for funding of expenses related to the GenESA System during 1996. The
Company plans to transfer its proprietary medical products, including worldwide
distribution rights to the GenESA System, into its wholly-owned subsidiary,
Gensia Automedics, Inc.
RELATIONSHIP WITH GENTA/JAGOTEC JOINT VENTURE
In January 1993, Gensia and a joint venture ("Genta-Jago") between Genta
Incorporated and Jagotec AG, an affiliate of Jago Pharma AG which was acquired
by SkyePharma PLC ("SkyePharma") in May 1996, formed a collaboration to develop
and market certain oral products for the treatment of cardiovascular disease
using Geomatrix controlled-release drug delivery technology. In February 1996,
Gensia informed Genta-Jago that it would be focusing its efforts in the future
on Geomatrix nifedipine and that it would not pursue development of the
Geomatrix formulations of verapamil and metaprolol. Effective October 1, 1996
Gensia Sicor transferred its rights under the collaboration to Brightstone
Pharma, Inc. ("Brightstone"), SkyePharma's U.S. subsidiary. Brightstone Pharma
Inc. will pay Gensia Sicor a royalty from its share of operating income, if any,
derived from any Geomatrix nifedipine products marketed by Brightstone and
Boehringer Mannheim Corporation. In 1996 Gensia paid $2.3 million in
development funding prior to transferring its rights.
David F. Hale, President and Chief Executive Officer of the Company and
James C. Blair, a director of the Company, were directors of Genta Incorporated
until their resignations in October 1996 and January 1997, respectively, and
Thomas H. Adams, chairman of the Board and Chief Executive Officer of Genta
Incorporated, is a member of Gensia's Scientific Advisory Board.
RELATIONSHIP WITH ALCO CHEMICALS, LTD.
Alco, an affiliate of Rakepoll Finance and wholly-owned by Carlo Salvi,
acts as a sales agent for certain bulk pharmaceutical products produced by
Sicor, in exchange for a commission of 4% of sales. Additionally, Alco acts as a
distributor for Sicor with respect to certain other bulk pharmaceutical products
pursuant to a series of distribution agreements (the "Distribution Agreements").
The Company intends to execute prior to June 30, 1997 an agreement (the "New
Agency Agreement") between the Company (or certain of its subsidiaries) and Alco
pursuant to which (i) each of the Distribution Agreements will formally be
cancelled, effective no later than June 30, 1997, and (ii) concurrent with the
effective date of such cancellation, Alco will be appointed as a non-exclusive
sales agent for certain bulk pharmaceutical products produced by certain
subsidiaries of the Company, in exchange for a commission of 4% of sales.
Thereafter the parties will determine, from time to time, those bulk
pharmaceutical products for which Alco will act as a sales agent, which products
will be set forth in an exhibit to the New Agency Agreement.
OTHER TRANSACTIONS
The Company has paid Domain Partners III, L.P. ("Domain III") the amount of
$75,000 as partial consideration for financial commitments made by Domain III in
connection with the possible funding of the development of a new product
opportunity involving a feedback controlled heparin drug delivery system (the
"Automedics Project"). In February 1996, the Board authorized the issuance of a
warrant to purchase up to 50,000 shares of the Company's Common Stock to Domain
III as partial consideration for financial commitments made in furtherance of
the Automedics Project. During 1995, Domain III made a loan in the principal
amount of $250,000 to Automedics, Inc., a wholly-owned subsidiary of the
Company, in connection with the Automedics Project. The loan, along with
accrued interest in the amount of $13,636, was repaid on January 2, 1996. Dr.
Blair, a director of the Company, is a general partner of One Palmer Square
Associates III, L.P., the general partner of Domain III.
-14-
<PAGE>
Ian McBeath, Vice President of Gensia Europe Limited until April 8, 1996,
was indebted to the Company in the aggregate amount of approximately
(Pounds)47,400. The indebtedness was evidenced by two loans, one secured by
real property and the other unsecured. The principal amount of the secured loan
was (Pounds)27,000 with an interest rate of 5% per annum. The principal amount
of the unsecured loan, an interest free loan, was (Pounds)18,014. Although Mr.
McBeath resigned as an officer of the Company on April 8, 1996, he continued to
render consulting services through July 1, 1996, at which time the secured loan,
the unsecured loan and (Pounds)2,700 in interest thereon became due and was
paid.
The Wilkerson Group has provided market research and consulting services to
the Company in 1996 for which the Company has paid The Wilkerson Group
approximately $102,000. Dr. Wilkerson, a director of the Company, was an
affiliate of The Wilkerson Group until May 1996.
Two relocation loans were previously made by the Company to Patrick D.
Walsh, President and Chief Operating Officer of Gensia Laboratories, Ltd. One
of the loans, in the principal amount of $35,000 was repaid in 1996. Mr. Walsh
is indebted to the Company in the aggregate principal amount of $100,000 with
respect to the other loan. Interest at the rate of 5% per annum is payable on
the loan. Accrued interest as of March 31, 1997 is approximately $13,000. The
loan is secured by real property and is due on October 12, 1999.
The Company believes that the foregoing transactions were in its best
interests. It is the Company's current policy that all transactions by the
Company with officers, directors, 5% stockholders or their affiliates will
be entered into only if such transactions are approved by a majority of the
disinterested directors, and are on terms no less favorable to the Company than
could be obtained from unaffiliated parties.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.
GENSIA SICOR INC.
By /s/ David F. Hale
------------------------------
Date: April 30, 1997 David F. Hale
President and Chief
Executive Officer
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