SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the quarterly period ended December 31, 1999
Commission File No. 0-15360
BIOJECT MEDICAL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1099680
- -------------------------------------- -----------------------------
(Jurisdiction of incorporation) (I.R.S. identification no.)
7620 SW Bridgeport Road
Portland, Oregon 97224
- -------------------------------------- -----------------------------
(Address of principal executive offices) (Zip code)
(503) 639-7221
-------------------------------------------------------
(Registrant's telephone number, including areas 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 [ ]
At December 31, 1999 there were 5,828,784 outstanding shares of common stock of
the registrant.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of Bioject
Medical Technologies Inc. ("BMT"), an Oregon corporation, and its subsidiaries
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. The Company's needle-free injector operations are conducted
by Bioject Inc. ("BI"), an Oregon corporation formed in February 1985, which is
a wholly owned subsidiary of BMTI. Its blood glucose monitoring system
operations are conducted by Marathon Medical Technologies Inc.("Marathon"), an
Oregon corporation formed in October 1997, which is wholly owned by BMTI.
The following 10-Q report reflects the consolidated results of operations,
cash flows and financial position for the third quarter of the year ending March
31, 2000. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the year.
- Consolidated Statements of Operations for the quarters ended
December 31, 1999 and December 31, 1998
- Consolidated Statements of Operations for the nine months ended
December 31, 1999 and December 31, 1998
- Consolidated Balance Sheets dated December 31, 1999 and March
31, 1999
- Consolidated Statements of Cash Flows for the nine months ended
December 31, 1999 and December 31, 1998
1
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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended
December 31,
1999 1998
----------- ----------
REVENUES:
Net sales of products $ 120,033 $ 51,476
Licensing/technology fees 150,000 887,283
----------- ---------
270,033 938,759
----------- ---------
EXPENSES:
Manufacturing 428,199 320,687
Research and development 287,999 239,711
Selling, general and administrative 604,362 560,609
----------- -----------
Total operating expenses 1,320,560 1,121,007
----------- -----------
Operating loss (1,050,527) (182,248)
Other income 55,154 34,815
----------- -----------
Loss from continuing operations
before taxes (995,373) (147,433)
Provision for income -- --
----------- -----------
Loss from continuing operations
Before preferred stock dividend (995,373) (147,433)
Preferred stock dividend (274,404) (361,234)
----------- -----------
Loss from continuing operations
Allocable to common shareholders (1,269,777) (508,667)
Loss from discontinued operations
Allocable to common shareholders -- (925,192)
----------- -----------
Net loss allocable to common
shareholders $(1,269,777) $(1,433,859)
=========== ===========
Basic and diluted net loss per
common share $ (.22) $ (.25)
=========== ===========
Shares used in per share calculation 5,805,515 5,781,653
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
2
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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine-Months Ended
December 31,
1999 1998
------------ -----------
REVENUES:
Net sales of products $ 563,417 $ 505,288
Licensing/technology fees 500,000 1,912,842
----------- -----------
1,063,417 2,418,130
----------- -----------
EXPENSES:
Manufacturing 1,337,999 1,091,015
Research and development 856,240 720,621
Selling, general and administrative 1,895,219 1,926,303
----------- -----------
Total operating expenses 4,089,458 3,737,939
----------- -----------
Operating loss (3,026,041) (1,319,809)
Other income 122,971 91,977
----------- -----------
Loss from continuing operations
before taxes (2,903,070) (1,227,832)
Provision for income taxes -- --
----------- -----------
Loss from continuing operations
Before preferred stock dividend (2,903,070) (1,227,832)
Preferred stock dividend (913,745) (1,056,496)
----------- -----------
Loss from continuing operations
Allocable to common shareholders (3,816,815) (2,284,328)
Loss from discontinued operations
Allocable to common shareholders (449,786) (2,838,755)
Gain on sale of discontinued operations 2,852,666 --
----------- -----------
Net loss allocable to common
shareholders $(1,413,935) $(5,123,083)
=========== ===========
Basic and diluted net loss per common share $ (.24) $ (.91)
=========== ===========
Shares used in per share calculation 5,803,341 5,622,280
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
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BIOJECT MEDICAL TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, March 31,
1999 1999
----------- -----------
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 3,146,022 $ 1,274,311
Accounts receivable, net 165,504 305,064
Stock subscription receivable -- 2,400,000
Inventories 892,439 1,251,186
Other current assets 51,890 53,599
Current assets of discontinued operations -- 597,000
------------ ------------
Total current assets 4,255,855 5,881,160
PROPERTY AND EQUIPMENT, at cost:
Machinery and equipment 2,301,744 2,235,733
Production molds 2,056,667 2,051,697
Furniture and fixtures 179,376 170,436
Leasehold improvements 94,115 94,115
------------ ------------
4,631,902 4,551,981
Less - Accumulated depreciation (3,133,553) (2,615,536)
------------ ------------
1,498,349 1,936,445
OTHER ASSETS 540,734 535,092
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS -- 238,583
------------ ------------
$ 6,294,938 $ 8,591,280
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 193,966 $ 190,676
Accrued payroll 145,462 135,445
Other accrued liabilities 48,854 54,388
Deferred revenue 100,000 --
Current liabilities of
discontinued operations 417,742 2,462,906
------------ ------------
Total current liabilities 906,024 2,843,415
SHAREHOLDERS' EQUITY:
Preferred stock, no par, 10,000,000
shares authorized; no shares issued
and outstanding
Series A Convertible- 692,694 shares,
$15 stated value 12,054,761 9,163,025
Series B Convertible - 134,333 shares,
$15 stated value -- 1,566,762
Series C Convertible - 391,830 2,400,000 2,400,000
Common stock, no par, 100,000,000 shares
authorized; issued and outstanding
5,828,784 and 5,802,248 shares
at December 31, 1999 and
March 31, 1999, respectively 50,324,121 50,594,111
Accumulated deficit (59,389,968) (57,976,033)
------------ ------------
Total shareholders' equity 5,388,914 5,747,865
------------ ------------
$ 6,294,938 $ 8,591,280
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
4
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BIOJECT MEDICAL TECHNOLOGIES INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Months Ended
December 31,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss allocable to common shareholders $ (1,413,935) $(5,123,083)
Adjustments to reconcile net loss
to net cash used in operating activities
from continuing operations:
Net loss from discontinued operations 449,786 2,838,755
Gain on sale of discontinued operations (2,852,666) --
Depreciation and amortization 547,243 537,131
Contributed capital for services 31,677 32,242
Preferred stock dividends 913,745 1,056,496
Net changes in assets and liabilities:
Accounts receivable 139,560 (179,539)
Inventories 358,747 (127,668)
Other current assets 1,709 12,827
Accounts payable 3,290 (261,751)
Accrued payroll 10,017 (49,046)
Other accrued liabilities (5,534) (96,467)
Deferred revenue 100,000 114,999
----------- -----------
Net cash used in operating activities
of continuing operations (1,716,361) (1,245,104)
Net cash provided by operating activities
of discontinued operations 1,524,752 (781,381)
----------- -----------
Net cash used in operating activities (191,609) (2,026,485)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Marathon Stock (331,456) --
Capital expenditures of
continuing operations (79,924) (69,533)
Capital expenditures of
discontinued operations -- (280,734)
Other assets (34,862) (78,664)
----------- -----------
Net cash used in investing activities (446,242) (428,931)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from the sale of Series C
Preferred stock 2,400,000 --
Cash proceeds from common stock 109,562 2,943,831
----------- -----------
Net cash provided by financing activities 2,509,562 2,943,831
----------- -----------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and
cash equivalents 1,871,711 488,415
Cash and cash equivalents at beginning
of period 1,274,311 1,900,839
----------- ----------
Cash and cash equivalents at end
of period $ 3,146,022 $ 2,389,254
=========== ===========
The accompanying notes are an integral part of these consolidated financial
Statements.
5
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BIOJECT MEDICAL TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY:
The consolidated financial statements of Bioject Medical Technologies Inc. (the
"Company"), include the accounts of Bioject Medical Technologies Inc. ("BMTI"),
an Oregon Corporation, and its wholly owned subsidiaries, Bioject Inc., an
Oregon Corporation ("Bioject"), and Marathon Medical Technologies, Inc.
(formerly Bioject JV Subsidiary Inc.), an Oregon corporation ("Marathon"). All
significant intercompany transactions have been eliminated. Although Bioject
Inc. commenced operations in 1985, BMTI was formed in December 1992 for the
purpose of acquiring all of the capital stock of Bioject Medical Systems Ltd., a
Company organized under the laws of British Columbia, Canada, in a
stock-for-stock exchange in order to establish a U.S. domestic corporation as
the publicly traded parent company for Bioject Inc. and Bioject Medical Systems
Ltd. Bioject Medical Systems Ltd. was terminated in fiscal 1997. Marathon
Medical Technologies, Inc. was formed in October 1997. At that time, Marathon
acquired the license to certain continuous blood glucose monitoring technology
from Elan Corporation, plc. ("Elan") and entered into a joint venture
arrangement with Elan to develop and commercialize the blood glucose monitoring
technology. On June 30, 1999, Marathon completed the sale of its license to the
blood glucose monitoring technology. In connection with the sale of the license,
BMTI acquired Elan's 19.9% ownership of the stock of Marathon. BMTI now owns
100% of Marathon's stock. Marathon's operations are reported as "Discontinued
Operations" in the financial statements and other financial information included
as a part of this report. All references to the Company include Bioject Medical
Technologies Inc. and its subsidiaries, unless the context requires otherwise.
The Company commenced operations in 1985 for the purpose of developing,
manufacturing and distributing a new drug delivery system. Since its formation,
the Company has been engaged principally in organizational, financing, research
and development, and marketing activities. In the last quarter of fiscal 1993,
the Company launched U.S. distribution of its Biojector 2000 system primarily to
the hospital and large clinic market. The Company's products and manufacturing
operations are subject to extensive government regulation, both in the U.S. and
abroad. In the U.S., the development, manufacture, marketing and promotion of
medical devices is regulated by the Food and Drug Administration ("FDA") under
the Federal Food, Drug, and Cosmetic Act ("FFDCA"). In 1987, the Company
received clearance from the FDA under Section 510(k) of the FFDCA to market a
hand-held CO2-powered needle-free injection system. In June 1994, the Company
received clearance from the FDA under Section 510(k) to market a version of its
Biojector 2000 system in a configuration targeted at high volume injection
applications. In October 1996, the Company received 510(k) clearance for a
needle-free disposable vial access device. In March 1997, the Company received
additional 510(k) clearance for certain enhancements to its Biojector 2000
system. In January 1999, the Company received ISO9001 and EN46001 certification
and in November 1999, the Company received CE Mark certification for the
Company's jet injection systems which allows the products to be sold in the
European Union. On March 23,1998, the Company entered into a transaction with
Vitajet Corporation ("Vitajet") whereby the Company acquired, along with certain
other assets, the rights to the Vitajet(R), a spring-powered, needle-free
self-injection device which currently has regulatory clearance for administering
injections of insulin. On September 30, 1997, the Company entered into a joint
venture agreement with Elan for the development and commercialization of certain
blood glucose monitoring technology which the Company licensed from Elan. On
June 30, 1999, Marathon completed a sale of the license to the blood glucose
monitoring technology, along with certain fixed assets related to the
development of that technology.
6
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BIOJECT MEDICAL TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Since its inception the Company has incurred operating losses and at December
31, 1999, has an accumulated deficit of approximately $59.4 million. The
Company's revenues to date have been derived primarily from licensing and
technology fees for the jet injection technology and from limited product sales
of the Biojector 2000 system and Biojector syringes. The product sales were
principally sales to dealers to stock their inventories. More recently, the
Company has sold its products to end-users, primarily public health clinics for
vaccinations and to nursing organizations for flu immunization. Future revenues
will depend upon acceptance and use by healthcare providers and on the Company
successfully entering into license and supply agreements with major
pharmaceutical and biotechnology companies. Uncertainties over government
regulation and competition in the healthcare industry may impact healthcare
provider expenditures and third party payer reimbursements and, accordingly, the
Company cannot predict what impact, if any, subsequent healthcare reforms and
industry trends might have on its business. In the future the Company is likely
to require substantial additional financing. Failure to obtain such financing on
favorable terms could adversely affect the Company's business.
2. ACCOUNTING POLICIES:
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined in a
manner which approximates the first-in, first out (FIFO) method. Costs utilized
for inventory valuation purposes include labor, materials and manufacturing
overhead. Net inventories consist of the following:
December 31, March 31,
1999 1999
----------- -----------
Raw Materials $ 253,850 $ 289,214
Work in Process 3,363 --
Finished Goods 635,226 961,972
----------- -----------
$ 892,439 $ 1,251,186
=========== ===========
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's expenses to conform
to the current year's presentation.
7
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BIOJECT MEDICAL TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NET LOSS PER SHARE
The following common stock equivalents are excluded from earnings per share
calculations as their effect would have been antidilutive:
Three Months Ended December 31, 1999 1998
--------- ---------
Warrants and stock options 2,581,305 1,707,191
Convertible preferred stock 2,377,053 1,759,545
--------- ---------
4,958,358 3,466,736
========= =========
3. CHANGES IN SHAREHOLDERS' EQUITY
On July 15, 1999, the Board of Directors approved, subject to the shareholder
approval, a proposal to amend the Articles of Incorporation to effect a reverse
stock split by exchanging five outstanding shares of the Company's common stock
for one new share of the Company's common stock. At the Company's annual meeting
in September, 1999, the shareholders approved the amendment to the Company's
Articles of Incorporation to effect a one-for-five reverse stock split. On
October 13, 1999, a one-for-five reverse stock split was effected. Prior to the
reverse split, 29,011,236 shares of Common Stock were outstanding, as well as
options, warrants and convertible preferred stock to acquire an additional
24,378,928 shares of common stock. The reverse stock split decreased the number
of outstanding shares of common stock to approximately 5.8 million shares and
approximately 4.8 million shares were reserved for issuance upon exercise of
outstanding options, warrants and the conversion of convertible preferred stock.
4. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying, unaudited consolidated financial statements do not include all
information and footnote disclosures normally included in audited financial
statements. However, in the opinion of management, all adjustments (which
include only normal, recurring adjustments) necessary to present fairly the
financial position, cash flows, and results of operations have been made. It is
suggested that these statements be read in conjunction with the financial
statements included in the Company's Annual Report on Form 10-K for the year
ended March 31, 1999.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is placing primary sales and marketing emphasis on business
development efforts to seek relationships with major pharmaceutical and
biotechnology companies in key niche markets to market its needle-free injection
products for specific applications and to develop other application-specific
devices and companion syringes. At the same time, with a reduced direct sales
force, the Company continues to focus on maintaining its penetration into the
public health and flu immunization markets with its Biojector 2000 needle-free
injection system. The Company is also directing its sales efforts at creating
sales of the Biojector 2000 system to the U.S. military. See "Forward-Looking
Statements."
The Company's revenues to date have not been sufficient to cover manufacturing
and operating expenses. However, the Company believes that if its products
attain significantly greater general market acceptance and if the Company is
able to enter into large volume supply agreements with major pharmaceutical and
biotechnology companies, the Company's product sales volume would increase.
Significantly higher product sales volume should allow the Company to realize
volume-related manufacturing cost efficiencies. This, in turn, should result in
reduced costs of goods as a percentage of sales, which could eventually allow
the Company to achieve positive gross profit. The Company believes that positive
gross profit from product sales, together with licensing and technology revenues
from agreements entered into with large pharmaceutical and biotechnology
companies would eventually allow the Company to operate profitably. The level of
revenues required to generate net income will be affected by a number of factors
including the mix of revenues between product sales and licensing and technology
fees, pricing of the Company's products, its ability to attain volume-related
and automation-related manufacturing efficiencies, and the impact of inflation
on the Company's manufacturing and other operating costs. There can be no
assurance that the Company will achieve sufficient cost reductions or sell its
products at prices or in volumes sufficient to achieve profitability or offset
increases in its costs should they occur. Further, there can be no assurance
that, in the future, the Company will be able to interest major pharmaceutical
or biotechnology companies in entering licensing or supply agreements. See
"Forward-Looking Statements."
On June 30, 1999, the Company entered into a binding letter agreement with a
major biotechnology company that provided for an evaluation of Bioject's jet
injection technology for use with certain biopharmaceutical products. Terms of
the agreement provided for up to $500,000 in licensing and technology fees based
upon meeting certain milestones. Based upon achievement of the milestones per
the binding letter agreement, the Company has received $500,000 with revenue of
$100,000 recognized in the first quarter of fiscal 2000, $250,000 recognized in
the second quarter of fiscal 2000, and the final $150,000 in the current fiscal
quarter. The Company is currently in negotiation for a long-term licensing and
supply agreement. There can be no assurance that the Company will be successful
in its negotiations for a long-term licensing and supply agreement. See "Forward
Looking Statements."
Marathon Medical Technologies, Inc. was formed in October 1997. At that time,
Marathon acquired the license to certain continuous blood glucose monitoring
technology from Elan Corporation, plc. ("Elan") and entered into a joint venture
arrangement with Elan to develop and commercialize the blood glucose monitoring
technology. On June 30, 1999, Marathon completed the sale of its license to the
blood glucose monitoring technology. In connection with the sale of the license,
the Company acquired Elan's 19.9% ownership of the stock of Marathon. The
Company now owns 100% of Marathon's stock. Marathon's operations are reported as
"Discontinued Operations" in the financial statements and other financial
information included as a part of this report.
On October 19, 1999, Bioject announced a strategic alliance with AngioSense,
Inc. to jointly develop innovative delivery systems to treat cardiovascular
disease. Bioject's needle-free drug delivery systems will be modified for
delivering bio-therapeutic solutions as a surgical instrument for minimally
invasive surgical procedures with several proprietary catheters being developed
by AngioSense for catheter-based cardiology interventions.
9
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The alliance grants AngioSense an exclusive license to Bioject's Biojector
2000(R) and Vitajet 3(R) jet injectors, as well as a customized version of
Bioject's Iject, a single-use disposable jet injector with a self-contained,
pre-filled medication cartridge to treat or diagnose cardiac or cardiovascular
diseases. According to the terms of the agreement, Bioject received an equity
position of approximately 10 percent in AngioSense upon completion of certain
product development milestones. Bioject has accomplished those milestones as of
December 31, 1999. Since Angiosense is a start-up company and in the research
and development phase and has not released a product on the market, the Company
has not recorded an asset on the balance sheet to account for the equity
interest. In addition to a long-term manufacturing and supply agreement with
AngioSense, Bioject will receive royalties on future product sales. Bioject will
also receive significant funding to support the development of the disposable
injector portion of the AngioSense delivery system. To date, the terms of the
funding have yet to be mutually determined by the joint development team. The
Iject will require FDA approval and clinical trials. The Company will assist
AngioSense to obtain such approval, although there can be no assurance that such
approval process can be completed on a timely basis or at all. There can be no
assurance that any developed product will receive regulatory approval or market
acceptance such that Bioject can expect to receive royalties from future product
sales. See "Forward Looking Statements."
In December 1999, Bioject and Serono Laboratories, Inc., the U.S. affiliate of
Ares-Serono, S.A., a leading biotechnology company headquartered in Geneva,
Switzerland, announced an exclusive license agreement in the U.S. and Canada to
deliver Serono's Saizen(R) recombinant human growth hormone with a customized
version of Bioject's Vitajet(TM) 3 needle-free delivery system. In connection
with the agreement, Serono paid an undisclosed license fee to Bioject and signed
a definitive supply agreement that commences upon FDA clearance. Clinical
studies evaluating the bioequivalence of Saizen(R) when delivered with the
Bioject needle-free delivery system have been completed. A 510(k) pre-market
notification has been submitted to the U.S. Food and Drug Administration (FDA).
There can be no assurance that the combined product will receive regulatory
approval or market acceptance such that Bioject can expect to receive future
product sales. See "Forward Looking Statements."
The Company's clinical research efforts are aimed primarily at clinical research
collaborations in the area of DNA-based vaccines and medications. Currently, the
B-2000 is being used in over 25 studies. Product development efforts are focused
primarily in three areas: i) developing low cost disposable "Iject" jet-injector
targeted for both clinical and home use markets; ii) developing pre-filled
syringes for use with the B-2000 and with other needle-free injectors presently
being developed; and iii) further developing the intradermal adapter for the
B-2000.
Revenues and results of operations have fluctuated and can be expected to
continue to fluctuate significantly from quarter to quarter and from year to
year. Various factors may affect quarterly and yearly operating results
including: i) length of time to close product sales; ii) customer budget cycles;
iii) implementing cost reduction measures; iv) uncertainties and changes in
product sales due to third party payer policies and proposals relating to
healthcare cost containment; v) timing and amount of payments under licensing
and technology development agreements; and vii) timing of new product
introductions by the Company and its competition. The Company does not expect to
report net income from operations in fiscal 2000. See "Forward-Looking
Statements."
10
<PAGE>
QUARTER ENDED DECEMBER 31, 1999 COMPARED TO QUARTER ENDED DECEMBER 31, 1998.
Product sales increased from $51,000 in the third quarter of fiscal 1999 to
$120,000 in the third quarter of fiscal 2000, a result of new customer sales and
flu season orders in the current quarter. License and technology fees decreased
from $887,000 in the third quarter of fiscal 1999 to $150,000 in the third
quarter of fiscal 2000. Fiscal 1999 license and technology fees were primarily a
result of $750,000 received from Merck. Fiscal 2000 fees are the result of fees
received from a major biotechnology company in connection with meeting certain
milestones.
Manufacturing expense increased from $321,000 in the third quarter of fiscal
1999 to $428,000 in the third quarter of fiscal 2000, as a result of adequate
existing supply inventories of B-2000 devices and Biojector syringes the Company
did not manufacture material quantities to absorb current manufacturing
overhead.
Research and development expenses increased from $240,000 in the third quarter
of fiscal 1999 to $288,000 in the third quarter of fiscal 2000. This increase is
primarily due to increased activity in the development of the disposable
injector, pre-filled syringes, and the intradermal spacer. Selling, general and
administrative expense increased from $561,000 in the third quarter of fiscal
1999 compared to $604,000 in the third quarter of fiscal 2000 primarily due to
costs associated with the one for five reverse split that occurred during the
current fiscal quarter.
NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1998. Revenues for the nine months ended December 31, 1999 consisted of product
sales of $563,000 and licensing and technology revenues of $500,000. This
compares to $505,000 in product sales and $1.91 million in licensing and
technology revenues for the nine months ended December 31, 1999. The increase in
product sales was primarily due to increased new customer sales and sales
volumes attained during flu season. The $1.91 million in licensing and
technology revenues in fiscal 1999 was primarily due to receipt of $1.5 million
in payments under the agreement signed with Merck in July 1998. Licensing fees
for fiscal 2000 are from fees received from a major biotechnology company.
Manufacturing expense increased from $1.09 million for the first nine months of
fiscal 1999 to $1.34 million for the nine months ended December 31, 1999. The
increase was primarily due to a decrease of manufacturing overhead absorbed into
inventory during the current fiscal year. The Company will draw primarily on
current inventories to fill most of its product orders through the end of fiscal
2000. Accordingly, the Company anticipates that production levels for the
Biojector and syringe manufacturing, and related absorption of manufacturing
overhead, for the remainder of fiscal 2000 will remain relatively constant. See
"Forward-Looking Statements."
Research and development expense increased from $721,000 in the nine months
ended December 31, 1999 to $856,000 in the first nine months of fiscal 2000. The
increase was principally due to research and development cost related to the
development of the disposable injector, pre-filled syringes and the intradermal
spacer. Selling, general and administrative expense decreased from $1.93 million
in the nine months ended December 31, 1998 to $1.90 million in the nine months
ended December 31, 1999, primarily as a result of decreased selling expenses.
11
<PAGE>
The preferred stock dividend decreased from $1.06 million for the first nine
months of 1998 to $914,000 for the nine months ended December 31, 1999. The
decrease in preferred stock dividend expense resulted from the conversion of the
Series B Preferred Stock to warrants in conjunction with the sale of the blood
glucose monitoring technology.
Other income consists of earnings on available cash balances and fluctuates
based on available cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in 1985, the Company has financed its operations, working
capital needs and capital expenditures primarily from private placements of
securities, exercises of stock options and warrants, proceeds received from its
initial public offering in 1986, proceeds received from a public offering of
common stock in November 1993, licensing and technology revenues, revenues from
sales of products and proceeds from the sale of the blood glucose monitoring
technology. Net proceeds received from issuance of securities from inception
through December 31, 1999 totaled approximately $62 million.
Cash, cash equivalents and marketable securities totaled $3.15 million at
December 30, 1999 compared to $1.27 million at March 31, 1999. The increase
resulted from cash proceeds received from issuance of the Company's Series C
Preferred Stock of $2.4 million, a minority interest capital contribution to
Marathon Medical of $597,000, the sale of Marathon Medical with net proceeds of
approximately $2.9 million, licensing fees and the exercise of stock options and
warrants, offset by operating cash requirements and capital asset purchases.
The Company believes that its current cash position, combined with revenues,
other cash receipts, and net proceeds from the sale of the glucose monitoring
technology will be sufficient to fund the Company's operations through the
second quarter of fiscal 2001. In addition, the Company is considering other
potential financing alternatives. Even if the Company is successful in obtaining
additional financing, unforeseen costs and expenses or lower than anticipated
cash receipts from product sales or research and development activities could
accelerate or increase the financing requirements. The Company has been
successful in raising required financing in the past and believes that
sufficient funds will be available to fund future operations. However, there can
be no assurance that the Company's efforts will be successful and there can be
no assurance that such financing will be available on terms which are not
significantly dilutive to existing shareholders. Failure to obtain needed
additional capital on terms acceptable to the Company, or at all, would
significantly restrict the Company's operations and ability to continue product
development and growth and materially adversely affect the Company's business.
The Company has no banking line of credit or other established source of
borrowing. See "Forward Looking Statements."
YEAR 2000 ISSUES. At December 31, 1999, the Company completed the assessment of
and took all necessary remedial action to correct any deficiency of internal
systems with regard to potential Year 2000 ("Y2K") issues. The assessment
included steps to review and obtain vendor certification of Y2K compliance for
current systems, testing system compliance and implementing corrective action
where necessary. A Y2K team composed of manager-level members from
Manufacturing, Purchasing, Information Services and Finance continues to monitor
the results. Assessment of the compliance of all critical systems, plans for
remedial action, if any, and estimates of the cost of such remedial action were
completed. The estimated cost to address the Company's Y2K issues are immaterial
and normal maintenance and upgrade operating budgets are expected to adequately
cover current and future funding requirements.
12
<PAGE>
PRODUCT. The Company's products do not incorporate either application or
embedded software and are therefore not subject to Y2K issues. The Company has
no knowledge that customers increased their on hand supply as a Y2K precaution.
INFORMATION SYSTEMS. The Company utilizes packaged application software for all
critical information systems functions, which have been certified by the vendors
as being Y2K compliant. This included financial software, operating and
networking systems, application and data servers, PC and communications hardware
and core office automation software. The company tested the reliability of the
application software and replaced systems where necessary and reasonably
believes it to be Y2K compliant. At January 1, 2000, all systems performed
without complications. See "Forward-Looking Statements."
MANUFACTURING SYSTEMS. The Company has received manufacturer certification of
Y2K compliance for all critical automated components used in manufacturing the
Company's products and at January 1, 2000, the manufacturing systems performed
without complications.
SUPPLIER BASE. The Company implemented a Y2K audit program of suppliers critical
to the Company's operations. These suppliers have certified Y2K compliance of
systems critical to maintaining a continuing source of supply to the Company. To
date the Company has seen no delay in delivery of product to manufacture its
products.
RISK. The Company did not experience any failures from external infrastructure
failures that could have arisen from Y2K failures, including failure of
electrical power and telecommunications.
Business risks to the Company of not successfully identifying Y2K issues and
undertaking effective remedial action included the inability to ship product,
delay or loss of revenue and delay in manufacturing operations. To date, the
Company believes that it successfully identified critical Y2K issues and
substantially completed required remedial action, and has not experienced any
business interruption that could cause the inability to ship product, delay or
loss of revenue or delay in the manufacturing process. Other than risks created
by infrastructure failures or by the Company's dealings with third parties,
where the actions of such third parties were beyond the Company's control, and
the Company believes that it will have no material business risk from Y2K
issues. There can be no assurance that infrastructure failures will not occur at
some later date or that third parties, over which the Company has no control
successfully addressed their own Y2K issues. See "Forward-Looking Statements."
FORWARD LOOKING STATEMENTS This report contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements concern, among other things, anticipated
revenues from product sales and licensing and technology fees, anticipated
funding from third parties for development projects, the Company's ability to
enter into long-term licensing and supply agreements, expected sufficiency of
capital resources to meet the Company's future requirements, future sources of
working capital, and Year 2000 issues. Paragraphs of this Report that include
forward-looking statements are often identified with a cross-reference to this
section. Forward-looking statements are based on expectations, assumptions
estimates and projections about the Company and the industry in which the
Company operates that involve risks and uncertainties. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that
13
<PAGE>
may cause the Company's actual results or industry results to be materially
different from the results, performance, or achievements discussed or implied in
the forward-looking statements. These risks and uncertainties include the
uncertainty of market acceptance of the Company's jet injection products,
uncertain successful completion of research and development projects, the
Company's need to enter into additional strategic corporate licensing
arrangements, the Company's ability to enter into long term supply agreements,
the Company's history of losses and its accumulated deficit and need for
additional financing, the Company's limited manufacturing experience, the
Company's dependence on the performance of existing and future corporate
partners and other third parties, uncertainties related to regulation by the FDA
and the need to obtain approval of new products and their application to
additional drugs, the possibility of product liability claims, dependence on key
employees and the risks related to competition.
Forward-looking statements are based on the estimates and opinions of management
on the date the statements are made. The Company assumes no obligation to update
forward-looking statements if conditions or management's estimates or opinions
should change, even if new information becomes available or other events occur
in the future. For a more detailed description and discussion of such risks,
uncertainties and other factors, readers of this report are referred to the
Company's filings with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended March 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
14
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None during the quarter ended December 31, 1999.
Item 2. Changes in Securities
On July 15, 1999, the Board of Directors approved, subject to the shareholder
approval, a proposal to amend the Articles of Incorporation to effect a reverse
stock split by exchanging five outstanding shares of the Company's common stock
for one new share of the Company's common stock. At the Company's annual meeting
in September, 1999, the shareholders approved the amendment to the Company's
Articles of Incorporation to effect a one-for-five reverse stock split. On
October 13, 1999, a one-for-five reverse stock split was effected. Prior to the
reverse split, 29,011,236 shares of Common Stock were outstanding, as well as
options, warrants and convertible preferred stock to acquire an additional
24,378,928 shares of common stock. The reverse stock split decreased the number
of outstanding shares of common stock to approximately 5.8 million shares and
approximately 4.8 million shares were reserved for issuance upon exercise of
outstanding options, warrants and the conversion of convertible preferred stock.
In December 1996, the Company completed two private placements of units, each
unit consisting of one share of Common Stock and one warrant to purchase one
share of Common Stock at an exercise price of $5.00. Preferred Technology, Inc.
acted as agent in connection with the first placement and in connection
therewith, received a placement fee and a warrant to acquire shares of Common
Stock at an exercise price per share of $4.140625. In December 1999, warrants to
purchase 20,286 shares of Common Stock were exercised at $5.00 per share.
The warrants and the shares issued upon exercise of the warrants have been
issued pursuant to an exemption from registration under Rule 506 of Regulation D
and Section 4(2) of the Securities Act. In relying upon such exemption (1) the
Company did not engage in any "general solicitation," (ii) the purchaser
represented and the Company reasonably believed that the purchaser was an
accredited investor and had such knowledge and experience in financial and
business matters such that it was capable of evaluating the merits and risks of
the prospective investment and was able to bear the economic risk of such
investment, (iii) the purchaser was provided access to all necessary and
adequate information to enable the purchaser to evaluate the financial risk
inherent in making an investment, and (iv) the purchaser represented that it was
acquiring the shares for itself and not for distribution.
Aggregate proceeds to the Company from the warrant exercises totaled
approximately $101,000. In December, 1999, stock option exercises of 3,250
shares of common stock were exercised for an aggregate of approximately $8,129.
Item 3. Defaults Upon Senior Securities
None during the quarter ended December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
None during the quarter ended December 31, 1999.
Item 5. Other Information
On October 7, 1999, Michael Sember resigned from Bioject's Board of
Directors.
15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS:
10.70 License and Distribution Agreement dated December 21, 1999
between Bioject, Inc. and Serono Laboratories, Inc. (An
application for confidential treatment has been submitted to
the SEC pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934, as amended. Confidential portions have been
omitted and filed separately with the SEC.)
27.1 Financial Data Schedule
REPORTS ON FORM 8K:
None during the quarter ended December 31, 1999
16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOJECT MEDICAL TECHNOLOGIES INC.
(Registrant)
Date: February 14, 2000 /S/ James O'Shea
---------------------------------
James O'Shea
Chairman, Chief Executive Officer
and President
/S/ Christine M. Farrell
---------------------------------
Christine M. Farrell
Controller and Secretary
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
10.70 License and Distribution Agreement dated December 21, 1999
between Bioject, Inc. and Serono Laboratories, Inc. (An
application for confidential treatment has been submitted to the
SEC pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended. Confidential portions have been omitted and
filed separately with the SEC.)
27.1 Financial Data Schedule
EXHIBIT 10.70
LICENSE AND DISTRIBUTION AGREEMENT
This License and Distribution Agreement (the "Agreement") is entered into and
effective this 21st day of December, 1999 ("Effective Date"), by and between
BIOJECT INC.
7620 S.W. Bridgeport Rd.
Portland, Oregon 97224
("Bioject")
AND:
SERONO LABORATORIES, INC.
100 Longwater Circle
Norwell, MA 02061
("Serono")
RECITALS:
A. Bioject designs, develops, manufactures and markets proprietary needle-free
drug delivery injection devices and related supplies; and
B. Serono has developed a proprietary human growth hormone and possesses
certain know-how and expertise in the marketing, selling and distributing
medical products and supplies, including drug delivery systems; and
C. Bioject and Serono desire to establish a relationship for the license and
distribution of the needle-free drug delivery injection devices and related
supplies specified herein, on the terms specified herein.
AGREEMENT:
In consideration of the mutual covenants contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Grant of License: License Fee; Option. Subject to all of the terms and
conditions set forth in this Agreement:
1.1 License Grant. Bioject hereby grants to Serono an exclusive right (as
to Bioject and all other parties) and exclusive license (as to Bioject
and all other parties) under the patents listed in Schedule 2.1 and
related technology, know-how and technical information (collectively,
the "Licensed Technology") during the term of this Agreement to use,
have used, sell, have sold, import and have imported needle-free
devices, syringes and supplies listed on Schedule 1.1 of this
Agreement (the "Products") for use in the Field (defined below) in the
United States, its territories and possessions and Canada (the
"Territory"). The term Products shall include all upgrades,
improvements, modifications and enhancements to the Products made
during the term of this Agreement. The term Products shall not include
needle-free devices materially
<PAGE>
different from the existing Products in significant respects. The
specifications for each Product are set forth on Schedule 1.1 of this
Agreement (the "Specifications"). The Specifications shall be amended
from time to time by the parties for upgrades, improvements,
enhancements and other changes to the Products. New needle-free
devices of Bioject that do not constitute Products shall be subject to
the right of first offer in favor of Serono set forth in Section 21 of
this Agreement.
1.2 Changes to Products. Bioject shall make changes to the Products
reasonably requested by Serono, provided that Serono shall pay the
cost of engineering any change to Products requested by it. Bioject
shall promptly provide Serono with an estimate of such costs and
receive Serono's approval of such estimate before undertaking any
change to the Products. Bioject shall not make any other changes to
the Products without Serono's prior written approval, which shall not
be unreasonably withheld or delayed. Serono may withhold its approval
in all cases where the requested change would impact its regulatory
commitments or approvals with respect to human growth hormone or
delivery of human growth hormone using the Products.
1.3 Sub-distributors. Serono shall have the right to appoint
sub-distributors to assist in the marketing, sale and distribution of
the Products in the Territory for use in the Field, provided that
Serono shall be responsible for ensuring that such sub-distributors
conduct their activities with respect to the Products in compliance
with Serono's obligations under this Agreement.
1.4 Definition of Field. "Field" means the use of a needle-free injection
device and syringe to administer human growth hormone to humans, but
specifically excluding treatment of AIDS-wasting.
1.5 No Rights by Implication. No rights or licenses with respect to the
Products or the Licensed Technology are granted or deemed granted
hereunder or in connection herewith, other than those rights or
licenses expressly granted in this Agreement.
1.6 Option for Extended Territory. Bioject hereby grants to Serono an
option to extend the Territory to ***. This option may be exercised by
written notice of exercise to Bioject at any time before ***. Prior to
expiration of this option and in order to preserve the benefit of this
option to Serono, Bioject shall not market, distribute or sell or
permit any other person to market, distribute or sell the Products for
use in the Field anywhere in the ***. Serono shall pay Bioject $***
for extension of the Territory to ***. The first $*** of such payment
shall be made upon exercise of the option. The remaining $*** shall be
paid *** (***) days after Serono and Bioject shall have secured all
regulatory approvals necessary for Serono to market and sell human
growth hormone for delivery with the Products in *** or ***. Such
payment shall be in addition to any other amounts due
-2-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
to Bioject under this Agreement. If this option is exercised and
payment is made as described in this Section 1.6, after exercise and
payment the term "Territory" shall mean ***. If Serono for itself or
one of its Affiliates exercises this option to extend the Territory,
the parties will negotiate in good faith any necessary amendments to
this Agreement to comply with applicable law and regulatory
requirements and, at the request of Serono, one or more separate
agreements between one or more Affiliates of Serono and Bioject
covering the extension Territory which shall be substantially the same
as this Agreement.
1.7 Affiliates of Serono. This Agreement shall be made for the benefit of
Serono and its Affiliates. Serono may designate one or more of its
Affiliates to exercise its rights, receive its benefits or perform its
obligations under this Agreement in whole or in part, provided that
Serono shall remain responsible for all obligations assigned by it to
its Affiliates under this Agreement. For purposes of this Agreement,
"Affiliate" of a party shall mean any corporation or other business
entity controlled by, controlling, or under common control with such
party.
2. Regulatory Matters.
2.1 Product Approvals in the United States and Canada. Bioject shall be
responsible for obtaining and maintaining all approvals, licenses and
permits necessary for manufacture of the Products and marketing,
selling and using the Products to administer Serono's human growth
hormone product in the United States and Canada, provided that Serono
shall be responsible for all approvals that relate to its human growth
hormone product generally. Bioject shall diligently pursue and provide
Serono with copies of the approval of its 510K application(s) for the
Products and all other regulatory approvals for the Products issued by
regulatory authorities in the United States and Canada.
2.2 Foreign Regulatory Approvals. After any exercise by Serono of its
option pursuant to Section 1.6 to extend the Territory to ***, Bioject
shall diligently obtain and maintain all approvals, licenses and
permits necessary for the import, marketing, sale and use of Products
to administer Serono's human growth hormone product in *** of the ***
and such *** as designated by *** from time to time, provided that
Serono shall be responsible for all approvals that relate to its human
growth hormone product generally.
2.3 Regulatory Assistance by Serono. Serono will use all commercially
reasonable efforts to assist Bioject in obtaining and maintaining all
necessary regulatory approvals with respect to marketing, sale and use
of the Products to administer Serono's human growth hormone products
in the Territory.
2.4 Regulatory Approvals for Serono's Human Growth Hormone. Serono shall
be responsible for obtaining and maintaining all necessary
-3-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
regulatory approvals for the manufacture, market, sale and use of its
human growth hormone product, including by means of delivery with the
Products, in the United States and Canada and, if the option pursuant
to Section 1.6 is exercised, in ***, *** of the *** and *** in which
Serono requests that Bioject pursue regulatory approval for the
Products.
2.5 Regulatory Assistance by Bioject. Bioject will use all commercially
reasonable efforts to assist Serono in obtaining and maintaining all
necessary regulatory approvals with respect to marketing, sale and use
of human growth hormone with the Products in the Territory. Without
limiting the foregoing, Bioject will provide Serono with (a) a
reasonable quantity of Products (but not less than ***) for use in any
required clinical trials at no charge (other than shipping costs), and
(b) reasonable access at no charge to Bioject's (i) records, study
results, research and other information and materials relating to the
Products and (ii) personnel for consultation. Bioject will also assist
Serono in the completion of all initial and periodic regulatory
filings relating to marketing, sale or use of human growth hormone
with the Products and make its facilities and records available for
inspection by the United States Food and Drug Administration ("FDA")
and international regulatory agencies.
2.6 Facility Inspections. Serono shall, upon reasonable notice to Bioject,
have the right to inspect the facilities in which the Products are
manufactured, tested or stored at any time during the term of this
Agreement and to observe the manufacture of the Products. Bioject
shall consult with Serono prior to any response to the FDA or other
regulatory authority relating to the Products, this Agreement or the
manufacture of the Products. Bioject will promptly notify Serono of
any FDA or other regulatory inspection related to the Products.
Bioject will promptly notify Serono of the results of any such
inspection and furnish Serono with a written description of actions
taken, if any, to remedy conditions cited in any such inspection.
2.7 Adverse Reactions and Reports. Bioject will be responsible for
completion and submission to the FDA of any form with respect to an
adverse reaction or event involving a Product sold hereunder or any
complaint that would require a field alert and all periodic and annual
reports, as and when appropriate, unless Serono is under any statutory
or regulatory obligation to make such or similar report or filing.
Each party will forward to the other, simultaneously with filing such,
a copy of each completed form with respect to an adverse reaction or
event or similar report or filing with respect to a Product sold
hereunder.
3. Appointment as Exclusive Distributor. Subject to the provisions of this
Agreement, Bioject hereby grants Serono the exclusive right to market, sell
and distribute the Products in the Field within the Territory directly and
indirectly, including through wholesalers and sub-distributors. Bioject
agrees that,
-4-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
during the term of this Agreement, it will not market, distribute or sell
or permit any other person to market, sell or resell the Products for use
in the Field in the Territory and that Bioject will take all commercially
reasonable actions to give full effect to the intention of this Section.
4. Purchase of Products by Serono.
4.1 Purchase and Sale. Subject to Section 4.2, Bioject agrees to sell the
Products to Serono in accordance with purchase orders submitted by
Serono, and Serono agrees to purchase the Products from Bioject
subject to the provisions of this Agreement.
4.2 Forecasts; Orders. On or before the *** (***) day of the months of ***
during the term of this Agreement, Serono will provide Bioject with a
written good-faith, non-binding *** (***) calendar month rolling
forecast of the *** that Serono expects to *** of the next *** (***)
calendar months. The first *** (***) calendar months of each rolling
forecast shall be binding. Serono will provide Bioject with firm
purchase orders from time to time setting forth the quantities and
forms of Products ordered and required delivery dates (a "Purchase
Order"). The quantities ordered in Purchase Orders will be no more
than *** (***) of the amount covered in Serono's binding forecast.
Bioject will use its reasonable commercial efforts to supply Products
in excess of such amount. Subject to the provisions of this Section
with respect to orders in excess of *** of Serono's forecast, Bioject
shall meet fully the requirements of each Purchase Order placed by
Serono hereunder. To the degree that either or both of the parties
find it convenient to employ their standard forms of purchase order or
acknowledgment of order in administering the terms of this Agreement,
it or they may do so but none of the terms and conditions printed or
otherwise appearing on such forms shall be applicable except to the
extent that it specifies information, such as quantities and delivery
dates, required to be furnished by either party hereunder.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, the parties agree that Serono shall submit its first rolling
forecast after approval by the FDA of Bioject's 510K application(s)
for the Products and that Bioject shall have a period of up to 90 days
to fill the first order for Products submitted by Serono after
approval by the FDA of Bioject's 510K application(s) for the Products.
The terms and conditions set forth in this Agreement shall be the
exclusive contract terms between the parties with respect to Serono's
purchase of the Products.
4.3 Return. Serono may not return any Products ordered by it without
Bioject's express written consent. Such consent shall not be withheld
for return of defective Products or Products being returned under
Warranty provisions set forth in Section 12 (each, a "Pre-approved
Return"). Provision by Bioject of a return goods authorization number
("RGA#") to Serono shall constitute express written consent to return
-5-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Products but only for the Products and in the quantities and serial or
lot numbers specified by such RGA#. Except for Pre-approved Returns,
Products returned for credit are subject to a minimum restocking
charge of 20% of the original purchase price. Except for Pre-approved
Returns, used, opened or customer damaged products are not eligible
for credit.
4.4 Not a Requirements Contract. Serono has no obligation to purchase all
of its requirements of needle-free drug delivery injection devices or
related supplies from Bioject. Without limiting the foregoing, Serono
may qualify other sources of supply for needle-free drug delivery
injection devices and related supplies, purchase such devices and
related supplies from others and/or produce such devices and related
supplies for itself.
5. License Fees and Quotas. Serono agrees to pay to Bioject the license fees
set forth in Schedule 5. Serono agrees to purchase from Bioject the
quantities of Product described in Schedule 5 in order to maintain
exclusivity for the Territory. If Serono *** at the ***, Serono may *** by
making *** to Bioject in accordance with the ***.
6. Prices and Discounts.
6.1 Prices. Serono shall purchase Products F.O.B. Bioject's factory at the
prices set forth in Schedule 6.1, plus any applicable insurance and
taxes. Bioject shall ship and insure Products with transportation and
insurance carriers selected by Serono. Freight costs, handling,
insurance, sales or other taxes and export or import fees, as
applicable, will be prepaid by Bioject and added to the invoice to be
paid by Serono. Bioject's *** at the option of Bioject upon *** (***)
days' written notice to Serono but not before the *** of the date of
this Agreement or more often than *** in any *** (***) month period
thereafter. Any price increase shall not exceed ***.
6.2 Most Favored Customer. The *** to Serono under this Agreement shall
*** taking into account any *** resulting from such *** to Bioject,
including, without limitation, any ***. If Bioject shall enter in
arrangements with any *** taking into account any *** resulting from
such *** to Bioject, then this Agreement shall thereupon be deemed
amended to provide *** to Serono, and notice thereof and *** shall
promptly be given to Serono by Bioject. All other terms and conditions
of sale to Serono, including warranty provisions with respect to the
Products, shall at all times be at least as favorable to Serono as
those terms offered to any other customer with respect to similar
products, including any wholesaler or distributor. In the event of any
shortages or capacity limitations, Bioject shall supply Products to
Serono to the best of its ability and shall not favor any other
customer over Serono.
6.3 Customer Prices and Terms. Serono shall be solely responsible for the
prices and other terms and conditions upon which it resells or
otherwise
-6-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
disposes of the Products, and Serono hereby acknowledges that Bioject
has no control whatsoever with respect to such resale prices or other
terms and conditions of resale but Bioject reserves the right to
advertise its list prices for similar products from time to time.
7. Payment for Products.
7.1 Product Purchase Price. The full price of all Products including
applicable shipping, insurance and taxes along with payment for any
other items for which Serono owes payment to Bioject shall be paid in
U.S. Dollars no later than 45 days after Serono's receipt of Bioject's
invoice or on such other terms agreed to in writing by the parties in
advance of the obligation for such payments. Bioject shall not issue
any invoice prior to performing the service billed or shipping the
Products billed.
7.2 Late Charge. Any amount not paid when within 45 days of Serono's
receipt of Bioject's invoice shall accrue a late payment charge at the
rate of one percent (1%) per month thereafter, provided that the fee
charged shall not exceed the highest rate permitted under applicable
law. The late payment charge shall be payable by Serono
notwithstanding any other remedy elected by Bioject under this
Agreement, including without limitation termination of the Agreement
in accordance with Section 20.4, below.
8. Delivery, Shipment and Inspection.
8.1 Delivery; Shipment. Delivery of the Products purchased by Serono shall
be made F.O.B. Bioject's factory in the continental United States, and
Bioject will give Serono firm shipment dates of all shipments in
accordance with Serono's Purchase Orders. Products at the time of
delivery will be in good condition and packaged for shipment in
accordance with standard commercial practices and Serono's reasonable
instructions. Serono shall take title to the Products upon such
delivery and all risks of loss and expenses in connection with the
Product shall thereafter rest upon Serono including, without
limitation, all risks and expenses incurred in the storage, cartage
and transportation of the Products, as well as all insurance, fees,
charges, taxes, customs, duties and governmental charges or levies and
all other charges and expenses whatsoever thereafter incurred with
respect to the Products. At the request of Serono, but at the sole
expense of Serono, Bioject shall procure insurance coverage for
shipments of the Products.
8.2 Inspection. Serono shall promptly perform an external visual
inspection of shipping cartons containing Products following receipt.
Serono shall also perform quality assurance testing on a sample basis.
Serono shall notify Bioject in writing within sixty (60) days after
arrival of any packing shortages or of any other failure of the
Products to conform to this Agreement based on its external visual
inspection of the shipping
-7-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
cartons and actual sample testing. Subject to Section 12 hereof,
Serono further shall notify Bioject in writing of any other failures
of the Product to conform to the Agreement within sixty (60) days
after the date of Serono's actual discovery thereof. All notifications
shall be accompanied by packing slips, inspection reports and all
other documents supporting Serono claims.
8.3 Partial Shipments. Bioject shall, if requested by Serono, have the
right to make partial shipments; each partial shipment shall be deemed
a separate sale and payment therefore shall become due in accordance
with the provisions of this Agreement.
9. Assistance and Training. Bioject shall, as reasonably requested by Serono,
render advice to Serono in connection with Serono's soliciting orders,
familiarize Serono with the operation of the Products, and render
assistance to Serono in training Serono's employees in connection with
soliciting orders for the Products.
Any training and assistance requested by Serono which necessitates travel
or other additional out-of-pocket costs to Bioject shall be at Serono's
expense and shall be due and payable within 45 days of invoicing.
10. Additional Obligations of Serono.
10.1 Personnel. Serono shall engage qualified representatives who are
familiar with the Products and their uses to sell the Products.
10.2 Promotions. Serono shall refrain from false or misleading sales or
promotions concerning the Products.
10.3 Territory. Serono shall refrain from establishing or maintaining any
branch, warehouse or distribution facility for the Products outside of
the Territory. Serono shall not engage in any advertising or
promotional activities relating to the Products directed primarily to
customers outside the Territory. Serono shall not solicit orders
directly from any prospective purchaser with its principal place of
business located outside the Territory.
If Serono receives any order from a prospective purchaser whose
principal place of business is known to Serono to be located outside
the Territory, Serono shall promptly refer that order to Bioject.
Serono shall not knowingly accept any such orders. Serono may not
deliver or tender (or cause to be delivered or tendered) any Product
outside of the Territory.
10.5 Compliance With Laws. Serono shall comply with all applicable
requirements of law, including without limitation requirements of the
FDA and of any similar non-U.S. government agency; shall obtain at its
own expense all licenses, permits, certificates or regulatory
clearances
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
which are required under applicable law to conduct its business and to
resell the Products as contemplated herein; and shall comply with all
other laws, rules and regulations applicable to such business.
10.6 Customer Complaints. Serono shall provide, upon Bioject's request,
copies of customer complaints received by Serono concerning the
Products. Serono shall cooperate fully with Bioject in dealing with
customer complaints concerning the Products and shall, at Bioject's
cost and expense, take such action as Bioject reasonably may request
to resolve such complaints.
10.7 Training. Serono also shall provide ongoing training services to its
customers who are medical professionals administering Serono's human
growth hormone product with the Products to the extent necessary to
assure that such personnel are adequately trained to utilize the
Products.
10.8 Inventory. Serono shall have the system capabilities to trace
shipments of Products by customer via product code and lot. Serono
agrees to maintain inventory levels of Bioject Products appropriate
for the Field and the Territory.
11. Advertising, Demonstration and Training Materials.
11.1 Materials. Bioject will furnish to Serono, at its own cost, copies of
all sales and promotional materials such as sales literature,
technical data, instruction manuals, technical journal reprints and
training videos, with respect to the Products as Serono may reasonably
request from time to time. All such materials shall be in such formats
as Serono may reasonably request to permit Serono to develop its own
custom version of the materials for use in marketing the Products as a
delivery system for Serono's human growth hormone product. Bioject
shall cooperate with Serono to produce versions of Bioject's standard
materials which are appropriate for use by Serono in marketing the
Products as a delivery system for Serono's human growth hormone
product. Any materials loaned to Serono such as film or artwork for
the purpose of Serono preparing its own promotional material must be
promptly returned to Bioject no later than the date specified in
writing by Bioject or, if not specified, 30 days after being made
available by Bioject for such use. Should Serono fail to return such
items to Bioject after written request, Bioject will invoice Serono
for the replacement cost of such items and Serono will pay for the
cost of such items in accordance with Section 7.1 of this Agreement.
11.2 Translation. Serono shall translate, at its own expense, all user and
technical manuals, and advertising and marketing information, into the
languages of its customers accurately. Serono agrees to provide
Bioject with copies of such materials prior to their use or
dissemination by
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Serono. Serono further agrees to provide Bioject with advance copies
of any other promotional and technical materials regarding the
Products prepared by Serono for review and approval by Bioject, such
approval not to be unreasonably withheld or delayed.
11.3 Demonstration Units. Bioject agrees to furnish to Serono, at Bioject's
own cost, a reasonable number of Products necessary to provide
demonstrations to interested, potential customers. The quantity of
Products supplied by Bioject to Serono for demonstration purposes
shall be not less than *** needle-free devices and associated
supplies. As of the date of this Agreement, *** demonstration devices
have been delivered by Bioject to Serono.
12. Warranties, Limitation and Disclaimer of Warranties and Limitation
Remedies.
12.1 Warranty. Bioject represents and warrants to Serono (and to its
distributors, customers and users of the Products) that the Products
shall be free from defects in materials and workmanship for a period
of eighteen (18) months from the date of delivery by Serono or its
distributors or wholesalers to the end user. Serono shall be
responsible for providing reasonable proof of the shipment date. This
Warranty does not apply to Products which have been altered, used for
a purpose other than one for which they were manufactured, or used in
any manner inconsistent with Bioject's written instructions.
This Warranty expires absolutely at the end of eighteen (18) months
following sale of the Products by Serono or its distributors or
wholesalers to the end user. No defects discovered after the end of
such period are covered by this Warranty.
The Warranty set forth in Section 12.1 herein applies to demonstration
Products only so long as they are used as demonstration Products and
shall terminate upon the earlier of 18 months from the date of first
use or the time of the first use for other than demonstration purpose.
12.2 Claim for Breach of Warranty. Serono (or its distributor, customer or
any end user) shall notify Bioject in writing of any defect within
sixty (60) days following the time prescribed in Section 12.1 and, at
Bioject's request, shall send the part or item believed to be
defective to Bioject, F.O.B. Bioject's designated facility for
examination and inspection. Serono (or its distributor, customer or
any end user) shall furnish in writing the serial number of each such
Product and a description of the alleged defect. Bioject shall not be
responsible for any defect due to alteration or improper use of the
Products. Bioject will return any repaired or replacement items to
Serono (or its distributor, customer or any end user), F.O.B.
Bioject's facility. Bioject will provide reimbursement or credit for
shipping costs with respect to Products found to have a defect covered
by this Warranty. With respect to Products that are defective, but do
not cause personal injury, death or a
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
recall and provided that the defects are not so frequent or numerous
so as to constitute a substantial failure to supply Products in
accordance with Serono's forecasts and Purchase Orders, the exclusive
remedy for breach of Bioject's Warranty hereunder shall be, at
Bioject's option, repair or replacement of the units of Products which
were not as warranted or refund of the purchase price with respect
thereto.
12.3 Product Meets Specifications and cGMPs. Bioject represents and
warrants that all Products delivered to Serono hereunder shall: (i)
have been manufactured in accordance with this Agreement, current Good
Manufacturing Practices and all applicable laws, regulations and
rules, all as in effect from time to time; and (ii) meet the
Specifications for the Products and all commitments made in regulatory
filings for the Products. Bioject further represents and warrants that
no Product shall be adulterated or misbranded as those terms are used
under the Federal Food, Drug and Cosmetic Act, as amended, due to any
action or omission of Bioject.
12.4 Product Approvals; Licensing. Bioject has secured (or will secure) and
will maintain in effect all approvals, licenses and permits necessary
for the manufacture, marketing, sale and use of the Products to
administer Serono's human growth hormone product in the United States
and Canada and, after and exercise of the option to extend the
Territory to ***, in *** and *** and such *** requested by ***.
Bioject represents and warrants that it has obtained and will maintain
on a current basis and will comply with all licenses, permits and
approvals of applicable governmental agencies as may be required for
its facilities and the manufacture of the Products and to perform its
obligations hereunder. Bioject represents and warrants that it has not
received any notice of adverse findings or similar regulatory letters
from regulatory agencies with respect to the Products or similar
products or the facilities in which the Products will be manufactured.
Bioject has disclosed to Serono all information relevant to the safety
and efficacy of the Products and similar products in its possession as
of the date hereof, and will disclose to Serono promptly and on a
continuous basis all additional such information obtained in the
future.
12.5 Compliance with Laws. Bioject represents and warrants that it shall
comply in all respects with all federal, state, and local laws,
regulations and other requirements applicable to the Products and the
performance of Bioject's obligations under this Agreement.
12.6 DISCLAIMER OF WARRANTY. EXCEPT AS EXPRESSLY PROVIDED IN THE ABOVE
WARRANTY, BIOJECT MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, WHETHER AS TO
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER
MATTER. NO AGENT, EMPLOYEE OR REPRESENTATIVE OF BIOJECT HAS ANY
AUTHORITY
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
TO BIND BIOJECT TO ANY AFFIRMATION, REPRESENTATION OR WARRANTY, EXCEPT
AS STATED HEREIN.
12.7 Maximum Liability. The maximum liability of one party to the other for
economic losses under this Agreement, including with respect to claims
under Section 13 (Indemnification), shall be $***. This limitation
shall not apply to recalls of a Product, claims, costs and losses
arising from personal injury or death caused by use of the Products or
Serono's growth hormone product, or any breach of Sections 1.6, 3 or
17.
12.8 Warranties of Serono. Any warranties or representations, or any
remedies for breach thereof, which Serono may provide to its customers
which are different from or in addition to the warranties and remedies
provided by Bioject under this Agreement shall be solely the
responsibility of Serono, and Bioject shall not be bound thereby in
any manner whatsoever.
13. Indemnification.
13.1 Definition of Claims. For purposes of this Agreement, "Claims" shall
mean any and all claims, demands, losses, liabilities, lawsuits,
proceedings, damages, settlement amounts and costs and expenses,
including, without limitation, attorneys' fees and costs.
13.2 Indemnification by Bioject. Bioject shall indemnify, defend, and hold
Serono, its wholesalers and distributors and their Affiliates and the
officers, directors, employees, agents, representatives and
independent contractors of each of them, harmless from and against any
and all Claims arising from or related to: (i) injury, death or other
loss caused by use of the Products; or (ii) Bioject's negligence,
willful misconduct or breach of this Agreement or any undertaking,
covenant, representation or warrant contained herein. The Parties
acknowledge and agree that acceptance by Serono of any Product or
expiration of any warranty set forth in Section 12 shall not affect
its rights to indemnification hereunder.
13.3 Indemnification by Serono. Except with respect to any matter covered
by Section 13.1 above, Serono shall indemnify, defend, and hold
Bioject and its Affiliates and the directors, officers, employees,
agents, representatives and independent contractors or each of them,
harmless from and against any and all Claims arising from or related
to: (i) injury, death or other loss caused by use of Serono's human
growth hormone product; or (ii) Serono's negligence, willful
misconduct or breach of this Agreement or any undertaking, covenant,
representation or warranty contained herein.
13.4 Procedures. Any party seeking indemnification hereunder (the
"Indemnified Party") shall give the other party (the "Indemnifying
Party") prompt written notice of the Claims for which indemnification
is sought.
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Failure of an Indemnified Party to provide notice of a Claim to the
Indemnifying Party shall affect the Indemnified Party's right to
indemnity only to the extent such failure shall have a material
adverse effect on the Indemnifying Party's ability to defend or the
nature or amount of liability. Claims shall be defended by the
Indemnifying Party with counsel selected by it. The Indemnified Party
shall have the right to be represented by advisory counsel and other
representatives, at its own expense. The Indemnifying Party shall keep
the Indemnified Party reasonably informed as to the status of the
Claim. The Parties shall render to each other such assistance as may
be reasonably required for the proper and adequate defense of a Claim.
Except as otherwise provided in Section 13.4, the Indemnifying Party
shall not make any settlement of any Claim without the written consent
of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, the Indemnifying
Party may make any settlement which solely involves the payment of
money and which the Indemnifying Party actually pays.
14. Mandatory Insurance.
14.1 By Bioject.
(a) During the term of this Agreement, Bioject shall procure and
maintain in full force and effect, at its own cost and expense, insurance
against the risks specified in this Agreement in amounts not less than the
amounts specified in (b), below.
(b) Bioject shall maintain the following minimum coverages with
respect to the matters covered by this Agreement:
(1) Worker's Compensation insurance in compliance with the
Worker's Compensation laws of the state or states in which
Bioject has employees performing work under this Agreement, and
employer's liability insurance with respect to such employees
with a minimum limit of $100,000/occurrence.
(2) Commercial general liability insurance including premises,
broad form property damage, contractual, products/completed
operations coverage, with a minimum limit of $5,000,000 each
occurrence.
(c) Terms of such coverage shall be evidenced by certificates of
insurance issued by a recognized insurer rated by A.M. Best A-(XV) or
better, to be furnished by Bioject to Serono at the inception of this
Agreement and as may be reasonably requested thereafter. Such certificates
shall name Serono and its Affiliates or their agents, employees or
directors, as additional insured, as their interests may appear, and
provide that thirty (30) days' written notice shall be given to Serono
prior to cancellation, modification or expiration of any of the terms of
coverage of any policy.
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
14.2 By Serono.
(a) During the Term of this Agreement Serono shall procure and
maintain in full force and effect, at its own cost and expense, insurance
against the risks specified in this Agreement in amounts not less than the
amounts specified in (b), below.
(b) Serono shall maintain the following minimum coverages with respect
to the matters covered by this Agreement:
(1) Workers' Compensation insurance in compliance with the
Worker's Compensation laws of the state or states in which Serono
has employees performing work under this Agreement, and
employer's liability insurance with respect to such employees
with a minimum limit $100,000/occurrence.
(2) Commercial general liability insurance including premises,
broad form property damage, contractual, products/completed
operations coverage, with a minimum limit of $5,000,000 each
occurrence.
(c) Terms of such coverage shall be evidenced by certificates of
insurance issued by a recognized insurer rated by A.M. Best A-(XV) or
better, to be furnished by Serono to Bioject at the inception of this
Agreement and as may be reasonably requested thereafter. Such certificates
shall name Bioject and its Affiliates, or their agents, employees or
directors as an additional insured, as their interests may appear, and
provide that thirty (30) days' written notice shall be given to Bioject
prior to cancellation, modification or expiration of any of the terms of
coverage of any policy.
15. Recall of Product.
15.1 Notice. In the event either party has reason to believe that any
Product should be recalled or withdrawn from distribution such party
shall immediately inform the other in writing in a factual,
non-judgmental manner.
15.2 Decision. The decision as to whether or not to initiate a recall may
be made by Serono after consultation with Bioject. Serono shall
conduct any recall.
15.3 Bioject's Liability. If such recall is required because of failure of
a Product to conform to the warranties in Section 12 or due to any
other defect relating to the Products, then the costs and expenses of
such recall shall be paid or reimbursed by Bioject and, at Serono's
option, Bioject shall replace such recalled Products or issue a credit
in favor of Serono or refund the purchase price of such recalled
Products.
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
15.4 Serono's Liability. If such recall is required because of a negligent
act or omission by Serono in the handling, storage or distribution of
a Product, then such recall shall be conducted by Serono at its sole
cost and expense and Serono shall not be entitled to any such credits,
replacements or refunds from Bioject.
16. Independent Contractor. This Agreement does not designate either party as
an agent, employee, joint venturer, partner, franchisee or legal
representative of the other party for any purpose whatsoever. Neither party
is granted, and at no time shall imply or claim that it possesses, any
right or authority to assume or create any obligation or responsibility on
behalf or in the name of the other party or to bind it in any manner
whatsoever. The Products purchased by Serono shall be owned by Serono, and
Serono shall handle the same at its own risk, assuming directly all
responsibility for its costs and expenses related to this Agreement and all
contingencies of profit and loss with respect to its performance of its
responsibilities and duties under this Agreement, Serono shall have the
sole right to control the manner in which it performs its responsibilities
and duties under this Agreement, subject to no control by Bioject except as
otherwise expressly provided in this Agreement and shall not be entitled to
any assistance from Bioject with respect to the performance of such duties
except as otherwise expressly provided in this Agreement. Serono is solely
responsible for making, and represents that it has made, its own
determination concerning the availability of a market for the Product and
acknowledges that Bioject has made no claims, representations or statements
to the effect (a) that there is a market for the Products; (ii) that
Bioject will locate customers for Serono; or (iii) that Serono will earn a
profit in the business of distributing the Products. Serono and Bioject
shall each indemnify and save each other harmless from and against all
claims, damages, losses, liabilities, expenses and costs (including
reasonable attorneys' fees) related to or arising out of any action of
conduct, or failure to act, of or by Serono and Bioject, their employees or
agent, including those purported but not actually authorized in writing by
any authorized officer of Bioject or Serono.
17. Protection of Confidential Information and Trademarks.
17.1 Information. Serono and Bioject acknowledge that they may acquire from
the other, certain trade secrets and confidential information relating
to know-how, technical data, service, promotion and sale of the
Products or human growth hormone, and the identity of customers and
potential customers. Serono and Bioject agree that the foregoing is of
substantial value in their respective businesses and each agrees to
keep the same confidential and not to disclose it to any person during
or after the term hereof. Notwithstanding the foregoing, Bioject
acknowledges that Serono possesses substantial information regarding
the market, customers and potential customers for and other
information about human growth hormone and human growth hormone
delivery systems. All of this existing information, including
additional information obtained or developed by Serono during the
course of this Agreement,
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
shall be the confidential information of Serono and Bioject shall not
acquire any interest therein.
17.2 Exceptions to Mutual Confidentiality Obligations. The obligation to
maintain in confidence all confidential information shall survive the
termination of this Agreement, but shall not apply to any information:
(a) which was known to the receiving party at or prior to the time of
its disclosure by the disclosing party as evidenced by the receiving
party's written records; (b) which becomes lawfully known to the
receiving party without any obligation of confidentiality at any time
through a third party not in breach of an obligation of
confidentiality; (c) which is or becomes known to the general public
through no fault of the receiving party; (d) which is independently
developed by the receiving party; (e) which the receiving party is
required by law to disclose, provided notice of such disclosure shall
be given promptly to the disclosing party so that it may take
reasonable actions to avoid and minimize the extent of such
disclosure.
17.3 Regulatory Exception of Serono. Serono shall be entitled to submit and
disclose to any regulatory authority and in any regulatory application
any and all information, including confidential information of
Bioject, required by law or regulation or deemed necessary by Serono
to obtain approvals for the marketing, sale and use of its human
growth hormone product with the Products in the Territory.
17.4 Bioject's Trademarks. Bioject hereby authorizes Serono to use
Bioject's trademarks and trade names for the Products solely in
connection with advertising, promoting, selling, or servicing the
Products during the term of this Agreement. Serono may not use the
name "Bioject" in its corporate or business name, or in any other
manner which Bioject deems adverse to its interest.
17.5 Serono's Trademarks. The Products shall be "private-labeled" with
tradenames and trademarks designated by Serono. Serono shall own and
have the exclusive right, title and interest in and to all such
tradenames and trademarks during and after the term of this Agreement.
Bioject shall have no right to use such tradenames or trademarks
except as directed by Serono during the term of this Agreement.
17.6 Termination. The authorization to use names, trademarks and trade
names owned by Bioject shall terminate effective upon termination of
this Agreement for any reason, and Serono thereupon shall cease all
use of names, trademarks, or trade names owned or used by Bioject,
except for a Product already owned by Serono.
17.7 Patent Prosecution and Infringement. Bioject shall, at its cost,
prepare and diligently prosecute patent applications covering the
Products in the
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Territory and continuations, divisions, renewals and reissues thereof.
Bioject shall diligently enforce its patent rights.
18. Inventions and Indemnitees.
18.1 Inventions, Modifications, and Improvements in the Field. New
techniques, inventions, processes, and know-how (hereinafter "New
Developments") relating to the Products or the Field may be developed
by Serono, Bioject or by Serono and Bioject jointly during the
performance of this Agreement. Serono shall own any New Developments
which are developed solely by Serono. To the extent that any such New
Developments are created by Bioject or jointly by Bioject and Serono,
in either case, at the direction or expense of Serono pursuant to
Section 1.2, then Serono shall have ownership of such New Developments
and Bioject shall have a non-transferable, non-exclusive,
royalty-free, worldwide, perpetual license to make and use the New
Developments as long as Bioject's use does not compromise Serono's
proprietary or confidential information. Notwithstanding the grant of
such license, Bioject shall not use any such New Development to
compete, or assist third parties to compete, directly or indirectly,
with Serono in the sale of human growth hormone for any therapeutic
use. Bioject agrees to cooperate in the filing and prosecution of all
New Development patent applications owned by Serono and to take all
other actions requested by Serono to vest ownership of all New
Developments in Serono.
18.2 Indemnity by Bioject. Bioject shall indemnify, defend and hold Serono,
its Affiliates and their respective officers, directors and employees
from and against any damages, liabilities, costs and expenses
(including reasonable attorneys' fees and court costs) (collectively,
"Damages") arising out of claims that proper use of the Products in
the Field, in accordance with its instructions infringe on the
intellectual property rights of third parties; provided, however,
that: (a) Serono shall have promptly provided Bioject with written
notice thereof and reasonable cooperation, information, and assistance
in connection therewith; and (b) Bioject shall have sole control and
authority with respect to the defense, settlement, or compromise
thereof; provided, however, that any settlement or compromise that
would impose liability on Serono shall require Serono's prior written
consent.
18.3 Indemnity by Serono. Serono shall indemnify, defend and hold Bioject,
its Affiliates and their respective officers, directors and employees
from and against any damages, liabilities, costs and expenses
(including reasonable attorneys' fees and court costs) (collectively,
"Damages") arising out of claims that proper use of any human growth
hormone, in accordance with its instructions infringe on the
intellectual property rights of third parties; provided, however,
that: (a) Bioject shall have promptly provided Serono with written
notice thereof and reasonable cooperation, information, and assistance
in connection therewith; and
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
(b) Serono shall have sole control and authority with respect to the
defense, settlement, or compromise thereof; provided, however, that
any settlement or compromise that would impose liability on Bioject
shall require Bioject's prior written consent.
18.4 Notification of Suit. Each indemnified party shall give the
indemnifying party written notice of any suit or action described in
Section 18.2 or 18.3 wherein indemnification is claimed. Such notice
shall be given within 30 days after acquiring such knowledge or at
least five days prior to the expiration of time in which a response
must be filed with a court or other judicial body, whichever is first
to occur.
19. Initial Term and Renewal. Unless sooner terminated as hereinafter provided,
this Agreement shall continue in force for three years from the Effective
Date. Thereafter, this Agreement may be renewed only by written agreement
of the parties.
20. Termination. This Agreement may be terminated as set forth below.
20.1 Mutual Termination. This Agreement may be terminated by mutual written
agreement executed by both parties.
20.2 Termination by Serono. Serono may terminate this Agreement without
cause or reason at any time upon 90 days notice to Bioject.
20.3 Delay in Regulatory Approval. Either party may terminate this
Agreement at any time after *** if Bioject shall not have secured
approval from the FDA of the marketing, sale and use of the Products
as a delivery system for Serono's human growth hormone.
20.4 Breach. Either Serono or Bioject may terminate this Agreement
effective upon sending written notice to the other, if a party fails
to pay the other any amount when due or commits any other breach or
default hereunder or otherwise fails to perform any of its duties or
responsibilities hereunder; provided that such failure to pay or such
other breach, default or nonperformance shall have continued for a
period of thirty (30) business days following receipt by a party of a
written notice from the other specifying the nature of such failure to
pay or such other breach, default or nonperformance. Notwithstanding
such termination, Serono shall continue to be obligated to accept and
pay for any of the Product ordered by Serono prior to the sending of
such notice. Similarly, any late payment charges accruing pursuant to
Section 7.3 above, survive such termination.
20.5 Insolvency. If (a) a party becomes insolvent; or a petition in
bankruptcy is filed by or against a party; or a party makes an
assignment for the benefit of its creditors; or a receiver or trustee
is appointed for any of a party's property; or (b) a party fails to
cure or remedy any breach, default or non-performance for which
written 30-day notice has been sent by a
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***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
party, then the other party may (i) terminate this Agreement,
effective upon the sending of written notice of such termination; (ii)
suspend its performance hereunder and stop any shipments in transit;
(iii) declare all amounts unpaid hereunder to be due and payable
immediately; or (iv) exercise any and all other remedies provided by
applicable law.
21. New Needle Free Devices. Bioject shall inform Serono on a quarterly basis
of each needle-free device that Bioject or any of its Affiliates is
developing or has acquired rights. If Serono *** to *** to the *** pursuant
to Section *** then, thereafter, as Bioject *** in or to *** which is not
*** and which could be ***, Bioject shall promptly provide Serono with ***.
The *** shall propose terms on which Serono may *** to *** and *** for ***,
and, alternatively, ***. Upon receipt of a ***, Serono shall have *** to
either *** of *** in the *** for the *** or provide a *** to Bioject. If
Serono *** of the *** for the ***, the parties shall prepare and execute an
agreement reflecting the terms of their arrangement. If Serono provides a
***, Bioject shall *** and *** for a *** to establish ***. If Serono does
not accept the terms of Bioject's *** and the parties do not agree on terms
pursuant to which Serono could ***, then Bioject may, at any time
thereafter, grant *** with respect to *** to *** on ***. Bioject shall not
discuss or negotiate for the *** with respect to a *** for *** until it has
provided any *** to Serono and the applicable time periods have expired.
22. Remedies Cumulative. The remedies provided herein to Bioject and to Serono
shall be cumulative and in addition to all other remedies which it may
exercise in equity or at law, and its exercise of any one or more of such
remedies, or a waiver of its right to exercise any other remedy or remedies
at the same time or at any other time shall not be deemed to be a waiver of
any other remedy of Bioject or Serono.
23. Duties Upon Termination. Upon termination, at the request of Serono,
Bioject shall fill all of Serono's orders for the Products as set forth in
the binding portion of its rolling forecast and Serono shall purchase and
pay for all Products subject to such orders. Serono may continue to sell
Products until it has disposed of its inventory.
24. Survival. Termination shall not affect the continued operation or
enforcement of the following Sections of this Agreement: 12, 13, 15, 17.1,
17.2, 17.5, 18, 22, 23, 25, 27, 29, 30 and 31.
25. Nonliability for Termination. If either party shall terminate this
Agreement in accordance with the terms hereof, then such terminating party
shall not be liable to the terminated party for any losses, damages,
expenditures, investments or commitments made by such terminated party
pursuant to or in connection with this Agreement, whether related to such
terminated party's lost business, lost profits, lost goodwill or otherwise.
26. Force Majeure. Neither party shall be deemed to be in breach hereof or
liable to other party or any other person in any manner on account of any
delay in delivery or other performance caused in whole or in part by, or
otherwise
-19-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
materially related to the occurrence of any contingency beyond such party's
reasonable control, including without limitation, fire, flood, riot,
hostilities, strikes or other labor disputes, freight embargoes or
transportation delays; shortage of labor; inability to secure fuel, energy,
materials, supplies or power at reasonable prices from regular sources or
on account of shortages thereof; delays or failures of any of such party's
suppliers to deliver; acts of God or of a public enemy; or any existing or
future laws, acts or regulations of the Federal or of any state or local
government (including specifically but not exclusively any orders, rules or
regulations issued by an official, court or agency of any such government)
affecting the conduct of such party's business with which such party, in
its judgment and discretion, deems it advisable to comply as its legal
duty.
27. Entire Agreement; Modification and Waiver. This Agreement, together with
the Schedules attached hereto, constitute the complete understanding and
contract with respect to the subject matter hereof. Neither Bioject nor
Serono shall be bound by any purported rescission, addition, modification,
or waiver of any provision hereof, or any purported waiver, or any breach
hereof unless such rescission, addition, modification or waiver is set
forth in a writing signed by an authorized agent of either Bioject or
Serono, respectively.
28. Nonassignment. Except as provided in Section 1.7, neither party may assign,
transfer or sell all or any part of its right, benefits or privileges
hereunder without the other party's prior written consent. Any attempt to
do so without such prior consent shall be wholly void. This Agreement will
be transferred and assigned on all legal successors of Bioject and Serono
and (i) any successor to Serono's business of selling human growth hormone
for the treatment of growth deficiencies or (ii) any successor to Bioject's
business of selling needle-free devices.
29. Public Announcements. Neither Serono nor Bioject will originate any
publicity, news release, or other public announcement or comments, written
or oral, whether to the press, stockholders or otherwise, related to this
Agreement without the consent of the other party, except as may be required
by law. The party making any announcement which it reasonably believes to
be required by law will first give the other party an opportunity to review
the form and content of any such announcement and comment upon it before it
is made.
30. Notices. Any notice required or permitted to be made or given under this
Agreement shall be in writing and transmitted by hand, prepaid certified
mail, air courier or telecopier addressed to the party to whom the notice
is given at its address or telecopier number shown below or at such other
address as the addressee shall have theretofore furnished in writing to the
other party.
-20-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Until changed, the address of Bioject shall be as follows:
Bioject, Inc.
7620 S.W. Bridgeport Road
Portland, Oregon 97224
Attention: President
Telecopier: (503) 624-9002
with a copy to:
Michael Redmond
Bioject Inc.
7620 S.W. Bridgeport Road
Portland, Oregon 97224
Telecopier: (503) 624-9002
Until changed, the address of Serono shall be:
Serono Laboratories, Inc.
100 Longwater Circle
Norwell, MA 02001
Attention: President
Telecopier: (781) 982-9478
with a copy to:
Serono Laboratories, Inc.
100 Longwater Circle
Norwell, MA 02001
Attention: General Counsel
Telecopier: (781) 878-6954
Notices or written communications shall be deemed to have been sufficiently
made or given (i) if by in-hand delivery or by telecopier with confirmed
transmission, when performed, (ii) if mailed, five (5) days after being
deposited in the mail, postage prepaid; or (iii) if by air courier, one (1) day
after delivery to the air courier company.
31. Construction of Agreement, Controlling Law. This Agreement, which is in
English, shall be interpreted in accordance with the commonly understood
meaning of the words and phrases hereof in the United States of America,
and it and performance of the parties hereto shall be construed and
governed according to the laws of the State of New York applicable to
contracts made to be fully performed therein.
SCHEDULES 1.1 (Specifications) 2.1 (Patents), 5 (License Fees and Purchase
Quotes) AND 6.1 (Product Pricing) ATTACHED HERETO ARE A MATERIAL PART OF THIS
AGREEMENT AND ARE INCORPORATED HEREIN BY THIS REFERENCE.
-21-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in the manner appropriate to each, effective as of the date entered on the first
page hereof.
BIOJECT, INC. SERONO LABORATORIES, INC.
By: ---------------------------- By: ------------------------------
Title: ------------------------- Title: ---------------------------
-22-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
SCHEDULE 1.1
SPECIFICATIONS
***: ***.
***: ***
***: ***
***: ***
***: ***
***: ***
***: ***
***: ***
-23-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
SCHEDULE 2.1
LICENSED PATENTS
United States Patent No. 5,782,802
Any other U.S. or foreign patents applicable to the Products held by or
licensed to Bioject.
-24-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
SCHEDULE 5
LICENSE FEES AND PURCHASE QUOTAS
License Fees
o Serono shall pay Bioject a one-time $*** license fee for the exclusive
license and distribution right of the Products for the Field in the United
States, its territories and possessions and Canada upon execution of this
agreement.
o Serono shall pay Bioject a one-time $*** additional license fee in two
installments pursuant to Section 1.6 if it elects to extend the exclusive
license in the Field to *** .
Annual Purchase Quotes
o For each twelve month period after FDA approval of Bioject's 510K
application for marketing, sale and use of the Products as a delivery
system for Serono's human growth hormone, Serono shall make the following
purchases of Products in order to maintain exclusivity in the United States
and Canada:
***
***
***
***
***
Notwithstanding the foregoing, if Serono's purchase of Products during any
such twelve month period is less than the quota, Serono may make a payment equal
to one-half of the shortfall and maintain exclusivity.
Serono shall purchase $*** of Products within *** after written notice from
Bioject that Bioject has received FDA approval of its 510K application for the
marketing, sale and use of the Products as a delivery system for Serono's human
growth hormone product.
o For each twelve month period after the first anniversary of any exercise by
Serono of its option to extend the Territory to *** and approval of
Bioject's application for marketing, sale and use of the Products as a
delivery system for Serono's human growth hormone in ***, Serono shall make
the following purchases of Products in order to maintain exclusivity in ***
(including the United States and Canada):
***
***
***
***
***
-25-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
Notwithstanding the foregoing, if Serono's *** during any *** is ***,
Serono may *** to ***. The *** shall be *** of the *** the *** and the *** by
Serono during the applicable period. Bioject shall have *** to *** in
consideration of *** because the purpose of *** is to *** for *** to ***.
-26-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<PAGE>
SCHEDULE 6.1
PRODUCT PRICING
Product Price
*** $***
Supplies Price
*** $***
*** $***
Serono: ----------
Bioject: ----------
Date: ----------
-27-
***Confidential portions omitted and submitted separately to the Securities and
Exchange Commission. An application for confidential treatment has been
submitted pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 3,146,022
<SECURITIES> 0
<RECEIVABLES> 165,504
<ALLOWANCES> 0
<INVENTORY> 892,439
<CURRENT-ASSETS> 4,255,855
<PP&E> 4,631,902
<DEPRECIATION> (3,133,553)
<TOTAL-ASSETS> 6,294,938
<CURRENT-LIABILITIES> 906,024
<BONDS> 0
0
14,454,761
<COMMON> 50,324,121
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,294,938
<SALES> 563,417
<TOTAL-REVENUES> 1,063,417
<CGS> 1,337,999
<TOTAL-COSTS> 1,337,999
<OTHER-EXPENSES> 2,751,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,903,070)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,816,815)
<DISCONTINUED> 2,402,880
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,413,935)
<EPS-BASIC> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
