SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
COMMISSION FILE NUMBER 1-10352
COLUMBIA LABORATORIES, INC.
(Exact name of Company as specified in its charter)
DELAWARE 59-2758596
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2875 N.E. 191ST STREET, SUITE 400
AVENTURA, FLORIDA 33180
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (305) 933-6089
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of the Common Stock of Columbia Laboratories, Inc.
issued and outstanding as of April 30, 1999: 28,684,687
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited, condensed consolidated financial statements of
the Company have been prepared in accordance with the instructions to Form 10-Q
and, therefore, omit or condense certain footnotes and other information
normally included in financial statements prepared in accordance with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial information for the interim periods reported have been made.
Results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results for the year ending December 31, 1999.
Except for historical information contained herein, the matters discussed
in this document are forward looking statements made pursuant to the safe harbor
provisions of the Securities Litigation Reform Act of 1995. Such statements
involve risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products and prices, and other factors discussed elsewhere
in this report.
Page 2 OF 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------------- ---------------
(Unaudited)
<S>
ASSETS <C> <C>
Current assets-
Cash and cash equivalents $ 2,921,497 $ 315,288
Accounts receivable, net 3,805,417 1,323,271
Inventories 1,782,463 2,411,434
Prepaid expenses 726,363 472,538
Other current assets 288,639 288,639
---------------- ---------------
Total current assets 9,524,379 4,811,170
Property and equipment, net 1,255,116 1,373,451
Intangible assets, net 5,246,294 5,283,277
Other assets 405,586 411,648
================ ===============
TOTAL ASSETS $ 16,431,375 $11,879,546
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities-
Accounts payable $ 3,053,200 $ 4,153,151
Accrued expenses 1,145,290 1,480,839
Deferred revenue 578,150 578,150
---------------- ---------------
Total current liabilities 4,776,640 6,212,140
Convertible subordinated note payable 10,000,000 10,000,000
---------------- ---------------
TOTAL LIABILITIES 14,776,640 16,212,140
---------------- ---------------
Stockholders' equity (deficiency)-
Preferred stock, $.01 par value; 1,000,000 shares authorized:
Series A Convertible Preferred Stock, 923
shares issued and outstanding in 1999 and 1998 9 9
Series B Convertible Preferred Stock, 1,630
shares issued and outstanding in 1999 and 1998 16 16
Series C Convertible Preferred Stock,
6,600 shares issued and outstanding in 1999 67 -
Common stock, $.01 par value; 40,000,000 shares
authorized; 28,684,687 shares
issued and outstanding in 1999 and 1998 286,846 286,846
Capital in excess of par value 99,714,196 93,221,998
Accumulated deficit (97,848,529) (97,988,640)
Accumulated other comprehensive income 102,130 147,177
Less: notes receivable for purchase of stock (600,000) -
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 1,654,735 (4,332,594)
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 16,431,375 $ 11,879,546
================ ===============
</TABLE>
See notes to condensed consolidated financial statements
Page 3 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------- ----------
<S> <C> <C>
NET SALES $ 5,466,461 $ 2,271,985
COST OF GOODS SOLD 1,776,841 1,405,984
------------ -------------
Gross profit 3,689,620 866,001
------------ --------------
OPERATING EXPENSES:
Selling and distribution 857,827 637,766
General and administrative 1,484,598 1,576,553
Research and development 1,390,076 1,791,109
----------- -----------
Total operating expenses 3,732,501 4,005,428
----------- -----------
Loss from operations (42,881) (3,139,427)
------------- ------------
OTHER INCOME (EXPENSE):
License fees, net of expenses 387,500 -
Interest income 30,496 42,870
Interest expense (188,838) (33,259)
Other, net (21,167) (67,609)
------------ -------------
207,991 (57,998)
------------ -------------
Income (loss) before income taxes 165,110 (3,197,425)
Provision for income taxes 25,000 -
------------ -------------
Net income (loss) $ 140,110 $ (3,197,425)
=========== =============
NET INCOME (LOSS) PER COMMON SHARE:
Basic $ .00 $ (.11)
=========== =============
Diluted $ .00 $ (.11)
=========== =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
Basic 28,685,000 28,660,000
========== ============
Diluted 28,985,000 28,660,000
========== ============
</TABLE>
See notes to condensed consolidated financial statements
Page 4 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------------- -----------------
<S> <C> <C>
NET INCOME (LOSS) $ 140,110 $(3,197,425)
Other Comprehensive income (loss):
Foreign currency translation, net of tax 38,290 7,865
------------------- -----------------
Comprehensive income (loss) $ 178,400 $(3,189,560)
=================== =================
</TABLE>
See notes to condensed consolidated financial statements.
Page 5 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $140,110 $(3,197,425)
Adjustments to reconcile net income (loss) to net
cash used for operating activities-
Depreciation and amortization 259,725 238,215
Issuance of warrants for consulting services 12,699 44,877
Changes in assets and liabilities- (Increase) decrease in:
Accounts receivable (2,482,146) 4,333,254
Inventories 628,971 47,319
Prepaid expenses (253,825) 217,427
Other assets 6,062 (271,308)
Increase (decrease) in:
Accounts payable (976,448) (647,591)
Accrued expenses (337,395) (421,444)
Deferred revenue - (355,295)
------------------ ---------
Net cash used in operating activities (3,002,247) (11,971)
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,406) (75,856)
Acquisition of licensing rights (100,000) -
------------ --------------
Net cash used in investing activities (104,406) (75,856)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock 5,939,534 -
Dividends paid (181,625) -
Issuance of note payable - 10,000,000
Proceeds from exercise of options and warrants - 356,138
------------------ ------------
Net cash provided by financing activities 5,757,909 10,356,138
----------- -----------
</TABLE>
(Continued)
Page 6 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
EFFECT OF EXCHANGE RATE CHANGES ON CASH (45,047) (7,865)
------------ -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,606,209 10,260,446
CASH AND CASH EQUIVALENTS,
Beginning of period 315,288 2,256,590
----------- ------------
CASH AND CASH EQUIVALENTS,
End of period $2,921,497 $12,517,036
========== ===========
</TABLE>
See notes to condensed consolidated financial statements
Page 7 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
The accounting policies followed for quarterly financial reporting are
the same as those disclosed in Note (1) of the Notes to Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
(2) INVENTORIES:
March 31, December 31,
1999 1998
------------ -------------
Finished goods $1,062,326 $1,550,917
Raw materials 720,137 860,517
------------ -------------
$1,782,463 $2,411,434
========== =============
(3) SERIES C CONVERTIBLE PREFERRED STOCK:
In January 1999, the Company raised approximately $6.4 million, net of
expenses from the issuance and sale of Series C Convertible Preferred Stock
("Preferred Stock"). The Preferred Stock, sold to twenty-four accredited
investors, has a stated value of $1,000 per share. The Preferred Stock is
convertible into common stock at the lower of: (i) $3.50 per common share (based
on 125% of the average of the five day's closing bid prices immediately
preceding the transaction) and (ii) 100% of the average of the closing prices
during the three trading days immediately preceding the conversion notice. If
conversion is based on the $3.50 conversion price, conversion may take place
after the underlying common stock is registered. If conversion is based on the
alternative calculation, conversion cannot take place for fifteen months. The
Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day
of the quarter. At March 31, 1999, the Preferred Stock had a liquidity
preference of $6,600,000.
In connection with the issuance of the Series C Convertible Preferred
Stock in January 1999, the Company received two notes receivable from Norman M.
Meier, the President and Chief Executive Officer, and from William J. Bologna,
the Chairman of the Board, for $350,000 and $250,000, respectively. The notes
bear interest at 5% per annum and are due on July 28, 1999. The notes totaling
$600,000 have been presented as a reduction of stockholders' equity in the
accompanying balance sheets.
Page 8 of 15
<PAGE>
(4) SEGMENT INFORMATION:
The Company and its subsidiaries are engaged in one line of business, the
development and sale of pharmaceutical products and cosmetics. The following
table shows selected information by geographic area:
<TABLE>
<CAPTION>
Net Loss from Identifiable
SALES OPERATIONS ASSETS
----- ---------- -------------
<S> <C> <C> <C>
As of and for the three months
ended March 31, 1999-
United States $4,498,887 $ 1,228,563 $11,391,018
Europe 967,574 (1,271,444) 5,040,357
---------- ----------- -----------
$5,466,461 $ (42,881) $16,431,375
========== =========== ===========
As of and for the three months
ended March 31, 1998-
United States $1,432,730 $(1,308,857) $13,920,323
Europe 839,255 (1,830,570) 6,655,431
---------- ----------- -----------
$2,271,985 $(3,139,427) $20,575,754
========== =========== ===========
</TABLE>
Page 9 of 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company and its representatives from time to time make written or
verbal forward looking statements, including statements contained in this and
other filings with the Securities and Exchange Commission and in the Company's
reports to stockholders, which are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Such statements
include, without limitation, the Company's expectations regarding sales,
earnings or other future financial performance and liquidity, product
introductions, entry into new geographic regions and general optimism about
future operations or operating results. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, without limitation:
(i) increased competitive activity from companies in the pharmaceutical
industry, some of which have greater resources than the Company; (ii) social,
political and economic risks to the Company's foreign operations, including
changes in foreign investment and trade policies and regulations of the host
countries and of the United States; (iii) changes in the laws, regulations and
policies, including changes in accounting standards, that affect, or will
affect, the Company in the United States and abroad; (iv) foreign currency
fluctuations affecting the relative prices at which the Company and foreign
competitors sell their products in the same market; and (v) the ability of the
Company and third parties, including customers or suppliers, to adequately
address Year 2000 issues. Additional information on factors that may affect the
business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission. All forward-looking
statements should be considered in light of these risks and uncertainties. The
Company assumes no responsibility to update forward-looking statements made
herein or otherwise.
Cash and cash equivalents increased from approximately $315,000 at
December 31, 1998 to approximately $2,921,000 at March 31, 1999. The Company
received approximately $5.9 million, net of expenses, from the issuance and
sales of Series C Convertible Preferred Stock (see note 3 to unaudited condensed
consolidated financial statements).
In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Products Corporation
("AHP") under which the Wyeth-Ayerst Laboratories division of AHP will market
Crinone. Under the terms of the agreement, as of March 31, 1999, the Company has
earned $17 million in milestone payments and will continue to receive additional
milestone payments. The Company also supplies Crinone to AHP at a price equal to
30% of AHP's net selling price.
In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary amenorrhea (loss of menstrual
period). In November 1996, the Company submitted a second NDA for clearance to
market Crinone for use in Assisted Reproductive Technologies ("ART") procedures,
including IN-VITRO fertilization, ovum donation and stimulated cycles. The FDA
granted the ART filing a priority review. In addition, in February 1997, the FDA
approved the Company's Treatment Protocol under its IND for the use of Crinone
in assisted fertility procedures. As a result, through leads generated by the
Wyeth-Ayerst institutional sales force, the Company has begun distributing
Crinone to leading infertility clinics throughout the United States.
In May 1997, the Company received U.S. marketing approval for Crinone
from the FDA for use as a progesterone supplementation or replacement as part of
an Assisted Reproductive Technology (ART)
Page 10 of 15
<PAGE>
treatment for infertile women with progesterone deficiency. In July 1997, the
Company received U.S. marketing approval for Crinone from the FDA for the
treatment of secondary amenorrhea (loss of menstrual period).
In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met. Through March 31, 1999, the Company has paid approximately $1.4 million
in royalty payments.
In March 1999, the Company entered into a license and supply agreement
with Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the
Company's previously unlicensed women's healthcare products in Italy, Portugal,
Greece and Ireland with a right of first refusal for Spain. Under the terms of
the agreement, the Company received a $387,500, net of expenses, upfront payment
and expects to receive future milestone payments as products are made available
by the Company.
The Company believes that sales and liquidity will increase as Crinone
is fully marketed by Wyeth-Ayerst.
As of March 31, 1999, the Company has outstanding exercisable options
and warrants that, if exercised, would result in approximately $50.3 million of
additional capital. However, there can be no assurance that such options or
warrants will be exercised.
Significant expenditures anticipated by the Company in the near future
are concentrated on research and development related to new products. The
Company anticipates it will spend approximately $7.5 million on research and
development in 1999 and an additional $400,000 on property and equipment.
As of March 31, 1999, the Company had available net operating loss
carryforwards of approximately $48 million to offset its future U.S. taxable
income.
In accordance with Statement of Financial Accounting Standards No.
109, as of March 31, 1999 and December 31, 1998, other assets in the
accompanying consolidated balance sheets include deferred tax assets of
approximately $17 million and $18 million, respectively, (comprised primarily of
a net operating loss carryforward) for which a valuation allowance has been
recorded since the realizability of the deferred tax assets are not
determinable.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS
ENDED MARCH 31, 1998
Net sales increased by approximately $3.2 million to approximately
$5.5 million in 1999 as compared to $2.3 million in 1998. Crinone, accounted for
approximately $2.7 million of the increase with sales of approximately $3.2
million in 1999 as compared to $547,000 in 1998. Sales of Replens increased by
approximately $457,000 from approximately $943,000 in 1998 to $1.4 million in
1999. The increase reflects the reacquisition of the product by the Company from
Warner-Lambert Company in April 1998. As a result of the reacquisition, the
Company sells Replens directly to chain drug stores, food stores and mass
merchandisers at wholesale prices instead of to Warner-Lambert at contract
manufacturing prices which are much lower than wholesale prices. Gross profit as
a percentage of net sales increased in 1999 as compared to 1998 from 38% to 67%
as a result of increased Crinone sales which has a higher gross profit
percentage.
Page 11 of 15
<PAGE>
Selling and distribution expenses increased by approximately $220,000
in 1999 to approximately $858,000 as compared to $638,000 in 1998, primarily as
a result of expenses related to the reacquisition of Replens and the marketing
of the product such as the amortization of the Replens trademark $77,000; media
advertising $65,000; advertising billbacks $53,000; and broker commissions
$62,000.
General and administrative expenses decreased by approximately $92,000
to approximately $1,485,000 in 1999 from $1,577,000 in 1998. The decrease was
primarily due to a $129,000 reduction in salaries and benefits, and a $373,000
reduction in investor relations fees, partially offset by a $399,000 increase in
legal fees. The increase in legal fees reflects additional attorney charges
related to litigation.
Research and development expenses decreased by approximately $401,000
from approximately $1,791,000 in 1998 to $1,390,000 in 1999. The decrease was in
part due to a $125,000 reimbursement of expenses incurred in 1998 negotiated and
received in 1999 from the Wyeth-Ayerst Laboratories' division of American Home
Products Corporation, an approximately $81,000 reduction in salaries and
benefits, and an approximately $88,000 decrease in Crinone development costs.
License fees in 1999 of $387,500, net of expenses totaling $112,500,
represent an upfront payment received in connection with the licensing agreement
with Mipharm SpA entered into in March 1999.
Interest expense increased in 1999 as a result of the $10 million note
bearing interest at 7 1/8 % issued by the Company on March 16, 1998 to an
institutional investor.
The Company has recorded a $25,000 alternative minimum tax provision
for U.S. federal taxes in 1999.
As a result, the net income for 1999 was $140,110 or $.00 per common
share as compared to a net loss in 1998 of $3,197,425 or $(.11) per common
share.
Page 12 OF 15
<PAGE>
COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company filed an action in the United States District
Court for the Southern District of Florida in November 1997 seeking a
declaratory judgement on certain issues related to its relationship
with Lake Pharmaceuticals, Inc. ("Lake") as governed in the contract
between the Company and Lake. Lake filed an action against the Company
in the United States District Court, Northern District of Illinois, for
damages alleged by Lake to have been suffered by it as a result of the
FDA's allegations in July 1997 that the Company's nonoxynol-9 product,
then marketed by Lake under the tradename Advantage 24, was not
permitted to be sold under the monograph. This action was dismissed by
the Illinois Court and transferred to the Florida Court for
consolidation as a counterclaim in the Florida action. The Company is
vigorously defending the Lake claims and believes that Lake's action
will be dismissed without any damage award to Lake and that the Company
will prevail in its claims against Lake for damages.
Other claims and complaints have been filed or are pending
against the Company with respect to various matters. In the opinion of
management and counsel, all such matters are adequately reserved for or
covered by insurance or, if not so covered, are without any or have
little merit or involve such amounts that if disposed of unfavorably
would not have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
In January 1999, the Company raised approximately $6.4
million, net of expenses from the issuance and sale of Series C
Convertible Preferred Stock ("Preferred Stock"). The Preferred Stock,
sold to twenty-four accredited investors, has a stated value of $1,000
per share. The Preferred Stock is convertible into common stock at the
lower of: (i)$3.50 per common share (based on 125% of the average of
the five day's closing bid prices immediately preceding the
transaction) and (ii) 100% of the average of the closing prices during
the three trading days immediately preceding the conversion notice. If
conversion is based on the $3.50 conversion price, conversion may take
place after the underlying common stock is registered. If conversion is
based on the alternative calculation, conversion cannot take place for
fifteen months. The Preferred Stock pays a 5% dividend, payable
quarterly in arrears on the last day of the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 annual meeting of shareholders was held on
January 28, 1999 for the purpose of electing the following eight
directors (with each nominee receiving at least 24,645,914 votes out
of a possible 28,729,620 votes): James J. Apostolakis, William J.
Bologna, Jean Carvais, M.D., Dominique de Ziegler, M.D., Norman M.
Meier, Denis O'Donnell, M.D., Selwyn Oskowitz, M.D. and Robert C.
Strauss.
Page 13 of 15
<PAGE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
10.16 - License and Supply Agreement dated March 5, 1999,
between the Company and Mipharm SpA.
11.1 - Statement Re: Computation of Per Share Earnings
27.1 - Financial Data Schedule (for SEC use only)
Reports on Form 8-K
None.
Page 14 of 15
<PAGE>
SIGNATURES
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.
COLUMBIA LABORATORIES, INC.
/S/ DAVID L. WEINBERG
----------------------------------------
DAVID L. WEINBERG, Vice President-
Finance and Administration,
Chief Financial Officer
DATE: MAY 12, 1999
------------------------
Page 15 of 15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBERS
10.16 - License and Supply Agreement dated March 5, 1999, between the Company
and Mipharm SpA.
11.1 - Statement Re: Computation of Per Share Earnings.
27 - Financial Data Schedule.
EXHIBIT 10.16
LICENSE AND SUPPLY AGREEMENT
This Agreement made and entered into as of the 5 day of March, 1999 by and
between Columbia Laboratories (Bermuda) Limited, a Bermuda corporation having
its principal place of business at Rosebank Center, 14 Bermudiana Road,
Pembroke, HM08 Bermuda ("Licensor"), and Mipharm SpA, Via B. Quaranta 12 20141
Milano, Italia ("Licensee").
WHEREAS, Licensor is the owner or exclusive Licensee of, and has the
right to, grant licenses with respect to certain Technology, Patents and the
Trademark (as hereinafter defined); and
WHEREAS, Licensor wishes to grant to Licensee an exclusive license or
sublicense (subject only to Licensor's retained use and manufacturing rights) to
the Technology (as hereinafter defined), Patents and to the Trademark for use
and sale of Product (as hereinafter defined), in the Territory (as hereinafter
defined), and Licensee wishes to receive such a license right, on the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants herein contained, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following terms (except as otherwise expressly
provided or unless the context otherwise requires) shall have the respective
meanings set forth below (it being understood that the terms defined in this
Agreement shall include the singular number in the plural, and the plural number
in the singular):
(a) "Affiliate" shall mean any corporation or other business entity, which
either directly or indirectly controls a party to this Agreement, is
controlled by such party, or is under common control of such party. As
used herein, the term "control" means possession of the power to direct
or cause the direction of the management and policies of a corporation
or other entity whether through the ownership of voting securities, by
contract or otherwise.
<PAGE>
(b) "Base Price" shall mean Direct Cost plus 20%.
(c) "Confidential Information" shall mean all information and/or
technical data which is disclosed by one party hereto to the other
party hereto which the disclosing party treats as confidential and
identifies as such, other than (i) information known to the
receiving party or its Affiliates prior to the disclosure of such
information to such party, provided said prior knowledge is
supportable by documentary evidence, (ii) information which at the
time of the disclosure is, or thereafter becomes, generally known to
the public, provided that such public knowledge does not result
from any act or disclosure by the receiving party or one of its
Affiliates in violations of the terms of this Agreement,
(iii) information which can be shown to be independently discovered,
after the date hereof, by a party, or one of its Affiliates, without
the aid, application or use of the disclosed information, or (iv)
information obtained by the receiving party from a third party
which, is determined to be in lawful possession of such
information, provided such third party is not in violation of any
contractual or legal obligation to the disclosing party with respect
to such information.
(d) "Direct Cost" shall mean the following direct costs of manufacturing
Product (as herein defined): raw material/ingredient costs, packaging
costs, direct labor.
(e) "Effective Date" shall mean the date of the execution of this
Agreement.
(f) "Finished Package Form" shall mean in the case of vaginally
administered products applicators wrapped in aluminum foil or tubes
with a reusable applicator with required leaflet printed in two colors
and inserted into an appropriate box with customary trade dress printed
in up to four colors. The boxes will be placed into appropriate outer
cartons which will be printed in one color with required labeling and
UPC codes. In the case of bioadhesive buccal tablets "Finished Package
Form" shall mean tablets in blister packs with required leaflet printed
in two colors and inserted into a appropriate box with customary trade
dress printed in up to four colors. The boxes will be placed into
appropriate outer cartons which will be printed in one color with
required labeling and UPC codes.
<PAGE>
(g) "Forecast" shall mean the official Licensee forecast as required by
paragraph 4(i)(j).
(h) "Intellectual Property Rights" shall mean trade secrets, trademarks,
trade names, logos, trade dress, graphics, designs, patents, copyrights
or other proprietary rights.
(i) "Net Sales" shall mean the gross revenue received by Licensee or
its Affiliates from the sale of the Product to non affiliated third
parties on which payments are due under this Agreement, less (a)
reasonable credits or allowances, if any, actually granted on account
of cash or trade discounts, recalls, rebates, rejection or return of
Product previously sold, (b) excises, sales taxes, value added taxes,
consumption taxes, duties or other taxes imposed upon and paid with
respect to such sales (excluding income or franchise taxes of any kind)
and (c) separately itemized insurance and transportation costs incurred
in shipping the Product to such third parties. No deduction shall be
made for any item of cost incurred by Licensee or its Affiliates in
preparing, manufacturing shipping or selling the Product except as
permitted pursuant to clauses (a), (b) or (c) of the foregoing
sentence. Net Sales shall not include any transfer between Licensee and
any of its Affiliates for resale. No transfer of the Product for test
or development purposes or as free samples shall be considered a sale
hereunder for accounting and payment purposes.
(j) "Patents" shall mean the patents and/or patent applications filed in
the Territory owned by the Licensor or its Affiliates or with respect
to which Licensor or its Affiliates may now or hereafter have the right
to grant licenses in the Territory, the claims of which may be
infringed, absent a license, by the manufacture, use or sale of Product
within the Territory, and any and all patents issued pursuant thereto,
as well as any patents to be applied for or issued to Licensor or its
Affiliates in the future during the term of this Agreement (schedule A
attached).
(k) "Product" shall mean Replens(R), Crinone(R) (progesterone gel) 4%
Replens(R) (New Formulation) Chronodyne(R) (terbutaline gel),
Testosterone buccal tablets for women, Advantage LA (nonoxynol-9 gel)
and other women's health care products developed by Licensor from the
effective date for the term of the license.
(l) "Purchase Price" shall have the meaning set forth in Section 5 of
this Agreement.
<PAGE>
(m) "Registration shall mean a new drug registration as defined by the
Italian Ministero delle Sanita or EMEA.
(n) "Regulatory Agency" shall mean the Italian Ministero delle Sanita
or EMEA.
(o) "Technology" shall mean all pharmacological, toxicological,
preclinical, clinical, technical and other information, data and
analysis and know-how relating to the registration, manufacture,
packaging, use, marketing and sale of the Product (including, without
limitation, all works copyrighted by Licensor) and all proprietary
rights relating thereto owned by Licensor or to which Licensor has
rights so as to be able to license, whether prior to or after the
Effective Date, and relating or pertaining to Product.
(p) "Territory" shall mean Italy, San Marino, Vatican City, Greece,
Portugal and Ireland.
(q) "Testosterone Product for Andropause" shall mean COL-1262, the 30 mg
buccal bioadhesive tablet developed by Licensor for use in complete
physiologic replacement of the hormone testosterone in men
(r) "Trademark" shall mean the any trademark owned by Licensor for use with
the Product. Licensee is free to select its own trademark in the
Territory in agreement with licensor which consent should not be
unreasonably withheld.
(s) "Unit" shall mean a single applicator in the case of unit-dose vaginal
applicators, a tube in the case of multidose tube with a reusable
applicator and a completed box in the case of buccal tablets.
(t) "Valid Claim" shall mean a claim which is contained in an unexpired,
issued Patent which has not been held invalid or unenforceable by a
decision of a court or patent office of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and
which has not been admitted to be invalid by the owner through
disclaimer.
2. Grant of License.
<PAGE>
(a) Licensor grants to Licensee, and Licensee accepts from Licensor, on the
terms and conditions stated herein, an exclusive (even as to Licensor
and Licensor's Affiliates) right and license, with the right to
sublicense its Affiliates under the Patents and Technology to market,
use and sell the Product in the Territory subject to the restriction in
section 2(b). Licensor grants to Licensee, and Licensee accepts from
Licensor, on terms and conditions stated herein, a nonexclusive right
and license under the Patents and Technology to make, have made Product
anywhere in the world, but only for sale in the Territory.
(b) Licensee acknowledges that Licensor has previously licensed Replens(R)
and Crinone(R) 4% in the Territory to third parties and Licensor will
use its best efforts to reacquire the rights for the Territory within
the first half of 1999.
(c) Licensor grants to the Licensee, and Licensee accepts from
Licensor, on the terms and conditions contained herein, (i) an
exclusive right and license to use the Trademark in the distribution,
advertising, marketing and sale of the Product (and any line extension
to the Product as to which Licensee has obtained Licensor's prior
written consent, not to be unreasonably withheld) in the Territory, and
(ii) a nonexclusive right and license to use the Trademark in the
manufacture, labeling, packaging of Product and any line extensions to
Product as to which Licensee has obtained Licensor's prior written
consent, not to be unreasonably withheld) anywhere in the world.
Licensor shall not use, nor permit any of its Affiliates or other
Licensees to use, the Trademark on any other product marketed or sold
in the Territory.
(d) Licensor's retained rights in the Territory in connection with the
Product shall include only those rights under the Patents, the
Trademark and Technology to make, have made and use Product as
necessary for Licensor to fulfill its commitments now or in the future
with respect to this Agreement and with respect to its Licensees who
market the Product outside the Territory, to otherwise operate its
business (it being understood that Licensor, its Affiliates and other
Licensees shall not sell or market the Product within the Territory),
and to make, have made, use, market and sell Product, itself or through
its Affiliates or Licensees, outside the Territory.
<PAGE>
(e) Licensor also grants to Licensee a right of first refusal to market,
use and sell the product in Spain if Licensor establishes a marketing
and sales organization in the country, or establishes a distribution
agreement with a local pharmaceutical company.
(f) If Licensee establishes marketing and sales operations in other
European countries, Licensor will make its best efforts to either
license its women's healthcare products to Licensee or enter into a
co-marketing or joint venture agreement for each of these countries.
(g) If Licensor does not enter into a worldwide agreement with a 3rd party
for its Testosterone Product for Andropause, Licensor grants a right of
first refusal to Licensee in the Territory. The terms and conditions of
such a license will be negotiated separately by the parties. If
Licensee can equal the offer from a third party for a worldwide joint
venture, Licensee has the right of first refusal.
3. License Fees
In consideration of the services by Licensor to research and develop the Product
and to obtain respective local approvals for the Product, all to the benefit of
Licensee pursuant to the license and other rights granted to Licensee hereunder,
Licensee shall pay to Licensor the following (all dollars mean U.S. dollars):
(a) Five hundred thousand dollars ($500,000) by the 31st of March 1999.
(b) One million eight hundred thousand dollars ($1.8 million) upon Licensor
receiving the license for Advantage LA(TM), Chronodyne(R)(terbutaline
gel) and Testosterone for women in Italy. Payments corresponding to 1/3
of the above sum will be made when each Product is approved by the
Reference Member State and the Regulatory Agency provided that both
parties agree that the market in the territory for such a Product is
sufficient to allow a reasonable commercial return. In case of
disagreement, market research will be conducted to determine if the
market is viable.
(c) Seven hundred thousand ($700 000) if the license for Crinone 4% is
assigned to Mipharm or if Mipharm becomes the Exclusive Distributor in
Italy.
<PAGE>
(d) Two hundred thousand ($200 000) if the license for Replens(R) is
assigned to Mipharm or if Mipharm becomes the Exclusive Distributor in
Italy.
(e) One hundred thousand ($100 000) when Replens(R) Clear is launched in
Italy.
(f) For future Products, no additional license fee will be charged.
However, payment of royalties will be negotiated.
4. Supply
(a) During the term of the Agreement Licensor shall supply Licensee
exclusively with the Product, unless otherwise agreed. All such Product
shall be delivered in Finished Package Form unless otherwise agreed. By
June 30, 1999 Licensor and Licensee will negotiate a separate
manufacturing contract for the supply of Licensor's Products in Europe
and North America.
(b) Although Licensor is responsible for production and quality control,
Licensee has the right of inspection to ensure Licensor meets all
appropriate standards set by Regulatory Agencies.
(c) Licensor shall be obliged to maintain the registration of the
manufacturing facilities with the appropriate Regulatory Authorities
and to allow inspection of such facilities by Regulatory Authorities
insofar as necessary or advisable in order to facilitate the supply to
Licensee of the Product, and promptly to notify Licensee of any
inspection of its own or its contract supplier's manufacturing
facilities by the Regulatory Authorities and to provide Licensee with
copies of any correspondence received from the Regulatory Authorities
setting forth the results of any such inspection insofar as Product is
concerned. Furthermore, as may be required for regulatory purposes
Licensor grants Licensee the right to refer to, and shall cause its
contract supplier to grant to Licensee access to contract supplier's
Master file relating to Product and undertakes to notify Licensee and
provide Licensee with specific details of any changes to said Master
File or other filings by contract supplier with the regulatory
authorities relative to Product. Licensor shall be kept duly informed
without any delay by copy letter of any correspondence between Licensee
and contract supplier, in the event that any such communication should
occur.
<PAGE>
(d) Upon reasonable prior notice given by Licensee to Licensor in
writing, Licensor shall cause contract supplier to permit
representatives of Licensee or designees of Licensee acceptable to
contract supplier to inspect any manufacturing or testing facilities
used by or in connection with the manufacture or testing of Product and
annual GMP audits provided that such representatives or designees of
Licensee shall conduct such inspections in a manner which shall cause
the least possible interruption to contract supplier's operations under
the particular circumstances. Such inspection shall take place in a
timely manner and shall be permitted to take place during any or all
phases of manufacturing and testing, and shall provide contract
supplier's granting to Licensee access to information in its possession
relevant to determining whether GMP are likely to be met with respect
to manufacture of Product.
(e) Personnel of Licensee or Licensee's designee shall be entitled to
witness the manufacturing of test batches, scale-up batches and
full-size production batches which in each case will be used as
Registration support batches filed by Licensee in Regulatory Authority
presentations. These batches would be prepared by the intended
commercial process for the Product or prepared to demonstrate the
quality of the entire process (validation) or any single aspect of a
critical manufacturing parameter. Licensee may witness and/or review
the analytical laboratory testing of any of the above cited batches or
of the methodology which will be used to support a regulatory authority
presentation. Licensee may prospectively review, to the extent
necessary for compliance with applicable GMP and for scheduling
purposes, the protocols and actual study data and results (process,
cleaning, sterilization validation) as related to such batches.
(f) Licensee shall keep all information disclosed or obtained by Licensee
under paragraphs 4(c)(d)(e), strictly confidential and not disclose the
same to any other person, except to the extent reasonably necessary or
appropriate under applicable regulations for Licensee to register
Product with the regulatory authorities or otherwise comply with
applicable law.
(g) The information disclosed shall be used only for that purpose which is
to check the compliance of contract supplier to GMP or any other
applicable regulation or any
<PAGE>
otherwise purpose agreed by Licensor and contract manufacturer. In no
case, Licensee shall use such information to manufacture Product,
except in case where such rights have been acquired from or transferred
to Licensor.
(h) Product in Finished Packaged Form shall be delivered by Licensor so as
to comply with the packaging and labeling requirements set forth by the
appropriate Regulatory Agencies.
(i) Licensee will supply Licensor with sales forecast between the time
of submission of a registration file in each country and the approval
by the appropriate regulatory authority in each country of the
Territory so that Licensor can plan production. If Licensee does not
market the Product in a country within six months of approval for both
marketing, price and reimbursement, where applicable, Licensee will pay
to Licensor twenty percent (20%) of the first year Forecast for each
year of delay in such country. It is additionally provided that such
payment will be reduced in the event Licensee introduceS the Product
within the 12 month period from the date of regulatory approval.
(j) After the product has been launched, Licensee will give Licensor,
on the first business day of the third month after said launch, a
Forecast of its requirements of Product for each country in which the
Product is marketed for the following 9 month period. This document
shall include the Licensee's firm order for the next 3 months, and its
estimated orders for the 6 months following the 3 months of firm
orders. Before the end of the first month of the program, Licensee will
issue a firm order for additional months and will update the 6 month
plan. This procedure will be followed each month to guarantee a 9 month
rolling plan with 3 months of firm orders. The Products described in
the order will be delivered to Licensee in accordance with the terms of
the order, but not less that three (3) months from the date of the
order. Licensor is obliged to supply the amount of Product requested in
the firm order except to the extent that such amount is more than 15%
higher than the amount that had been forecasted for the period in the
last Forecast received by Licensor; With respect to any excess,
Licensor is obligated to use commercially reasonable efforts to supply
the requested amounts to Licensee.
(k) Licensor shall use reasonable commercial efforts to notify Licensee
within thirty (30)
<PAGE>
days after the Effective Date and thereafter thirty (30) days prior to
the end of each calendar year, of factory vacation schedules for the
coming year, and such vacation schedules will be incorporated into
Licensee's Forecasts.
(l) Licensor bears the expense and responsibility for transportation and
insurance to the Licensee choice of airport or seaport (FOB port)
nearest to the manufacturing site where the Product is manufactured;
thereafter, transportation, insurance and duties are the responsibility
of Licensee.
(m) Licensor will air freight samples of each shipment to Licensee no later
than 15 days prior to the delivery of the shipment for Licensee's tests
and quality control procedures. Licensee must notify Licensor in
writing of any rejection under those tests and procedures within 15
days (except as to latent defects), and Licensor has 30 days to replace
the rejected shipment with Product that meets the agreed upon
specifications in the regulatory filings. The expense of return,
manufacture of replacement Product and shipment of replacement Product
are Licensor's.
(n) Licensor will use its best efforts to provide Licensee with its ordered
amounts (up to 15% over the Licensee's Forecast) and with respect to
any excess over the 15% above Forecast, Licensor will use commercially
reasonable efforts to supply the requested amounts.
(o) In the event the Licensor is unable, due to reasons beyond its control,
to provide Licensee the amount of Product set forth in any firm order,
Licensor shall be obligated to provide such amounts of Product to
Licensee through third parties with which the Licensor contracts, and
Licensor shall be responsible for any additional costs of Product
caused thereby, provided that the provisions of this sentence shall not
apply to the extent that the amount of Product set forth in such firm
order exceed by more than 15% the Forecast.
5. Price and Payment Terms.
(a) The FOB Purchase Price to be paid by Licensee for the Product in
Finished Package
<PAGE>
Form shall be 28% of Net Sales including royalties charged to
customers. Licensor may request renegotiations of such price in the
event that it can demonstrate that the Direct Cost plus royalties
exceeds 28% of Net Sales. When patent protection no longer exists, the
parties will renegotiate the Price.
(b) At Licensee's request Licensor will supply promotional samples of
Product in Finished Package Form ex works Purchase Price equal to
Licensor's Direct Cost.
(c) Licensee's Purchase Price for Product purchased from Licensor shall be
paid in EURO's 60 days after the later of (A) receipt by Licensee of an
invoice for such Product, and (B) the shipment by Licensor of the
corresponding Product. Such payments by Licensee and invoice by
Licensor shall be based upon a reasonable estimate of the applicable
Purchase Price described in Sections 5 (a) (b) hereof. Such estimated
payments by Licensee shall be adjusted on a quarterly basis to reflect
actual amounts due from Licensee pursuant to Sections 5 (a) (b) hereof.
All payments to be made pursuant to this paragraph (c) shall accrue in the
national currency of the country where the sale on which payment is based was
made. Such payment shall be converted into the equivalent value in EURO's at the
applicable rate of exchange existing at the time of payment and shall be paid at
the appointed place of payment.
6. Marketing.
(a) Licensee will be responsible for marketing and sales of Product in the
Territory. Licensee will use its best efforts consistent with its
reasonable business judgement to make Product a commercial success by
making a commitment throughout the term of the Agreement, financial and
otherwise, to no less than its commitment, to those of its own brands
and products in similar circumstances that it actively and aggressively
promotes, in accordance with the life cycle of such products.
(b) Licensee will provide monthly sales and other marketing information
useful to the Licensor in monitoring sales progress.
<PAGE>
7. Clinical Trials and Registration
(a) Licensor will be responsible for clinical trials and Registration
filings related to the Product in the Territory. Licensor will consult
with Licensee on clinical trials required for Registration in the
Territory.
(b) Licensee shall have the right to monitor and audit the clinical trials
and/or other tests required by the protocols needed for Registration.
(c) To the extent Licensee seeks to amend the labeling or support
additional advertising claims for the Product beyond that which is
contemplated in paragraph 7(a) for Registration, at its sole discretion
and expense it may design conduct and control such additional clinical
trials necessary to obtain Regulatory Authority approval, provided,
that Licensee shall give Licensor prior written notice of its intention
to do so. Licensee shall own and have unrestricted rights to the
clinical data generated as a result of clinical trials conducted by
Licensee; provided that the results of such clinical trials shall be
made available to Licensor free of charge to be used in connection with
Marketing operations of Licensor: otherwise, if such results are used
for Dossier Data and Regulatory submissions outside the Territory, in
support of a new indication, Licensor shall reimburse to Licensee 50%
of all costs sustained by Licensee for such clinical studies.
(d) Each party will immediately notify the other of any adverse or
unexpected reaction or results or any actual or potential government
action relevant to Product and the parties will discuss with each other
measures to be undertaken to resolve the problem.
8. Maintenance of Patents and Trademarks.
(a) Licensor shall keep Licensee currently advised of all steps taken
or to be taken in the prosecution of all applications for patents
relating to the Product. Licensor shall have full and complete control
over any reissue or reexamination or other proceedings relating to the
Patents, the Trademark and/or Technology and of any disclaimers
thereof. Licensor shall bear all costs for the maintenance and
enforcement of the Patents and Trademark, as well as all costs for the
filing, maintenance and enforcement of all additional patents which may
be filed by the Licensor during the
<PAGE>
term hereof. If Licensor fails to carry out such obligations set forth
in this Section 8, Licensee may carry out such obligations on Licensors
behalf at Licensor's cost and may set off such cost against amounts due
to Licensor hereunder provided that such action is commercially
reasonable.
(b) TRADEMARK USE AND QUALITY CONTROL
i. Licensee agrees to use the Trademark in accordance with good
customary trademark practice, and to avoid taking any action
that would in any manner impair or detract from the value of
the Trademark or the goodwill and reputation of Licensee.
Licensee acknowledges Licensor's ownership of the Trademark
and related goodwill, both in the Territory and outside the
Territory.
ii. Licensee agrees that the nature and quality of all of
Licensee's advertising, promotional and other related uses of
the Trademark pursuant to this Agreement shall conform to
standards set by Licensor. Licensee agrees to cooperate with
Licensor in facilitating Licensor's control of such nature and
quality, and to supply Licensor in advance with specimens of
all uses of the Trademark. Licensee also agrees to obtain
Licensor's written permission regarding the nature and quality
of each use of the Trademark, prior to such use, provided,
however, that such permission shall be granted unless Licensor
reasonably objects on the basis that the proposed use will
impair the value of the Trademark or will otherwise fail to
conform to the standards set by Licensor. If such permission
or objection is not transmitted by Licensor within three (3)
business days of Licensor's receipt of the request for
permission along with the subject specimens, then Licensor
shall be deemed to have granted permission.
iii. Licensee agrees to use the Trademark only in the form and
manner and with appropriate legends as approved from time to
time by Licensor, and not to use any other trademark or
service mark in combination with the Trademark without prior
written approval of Licensor.
iv. If Licensee utilizes its own trademark, it may at its
discretion identify the
<PAGE>
Product as one that has been developed with the Licensors
technology.
(9) Infringement.
(a) Licensee and Licensor shall each promptly notify the other following
the discovery of any alleged infringement or unauthorized use of the
Patents, Technology and/or Trademark which may come to their attention.
Licensor shall promptly undertake, at Licensor's expense, reasonable
efforts to obtain a discontinuance of the infringement or unauthorized
use and, if not successful, Licensor will bring suit against such
infringer unless the patent is no longer necessary to protect the
product.
(b) If Licensor fails to obtain a discontinuance of such infringement,
then Licensor shall give notice in writing to Licensee within thirty
(30) days of such failure or election and Licensee may, but is not
required to, obtain a discontinuance of the alleged infringement or
unauthorized use or bring an infringement suit; provided, that Licensee
shall not agree to any settlement with respect to such infringement or
unauthorized use without the prior written consent of Licensor. Any
infringement suit by the Licensee shall be in the name of the Licensee,
or in the name of the Licensor, or jointly by both Licensee or
Licensor, as may be required by the law of the forum. Licensor shall
execute such documentation as may be reasonably required by Licensee.
(c) It is understood and agreed that the party to this Agreement that
institutes suit or action shall bear solely all costs and expenses in
connection therewith and shall be entitled to recover all costs first
and then share 50/50 the balance of any sums received, obtained,
collected or recovered whether by judgement, settlement or otherwise,
as a result of such suit; provided, however, that if a settlement by
Licensee (with the prior written consent of the Licensor) includes the
granting by Licensee of rights hereunder to a third party, amounts
received by Licensee or such third party shall not be included in Net
Sales. In addition, with respect to any suit for infringement or
unauthorized use of the Patents, Technology and /or Trademark, the
party that did not institute suit shall render all reasonable
assistance to the party that did institute suit, including but not
limited to, executing all documents as may be reasonably requested by
the party that did institute the suit.
<PAGE>
10. Infringement of Third Party Intellectual Property Rights.
(a) Each party hereto shall notify the other promptly in the event of the
receipt of notice of any action, suit or claim alleging infringement by
the Patents, the Trademark or the Product, of any Intellectual Property
Rights of a third party.
(b) In no event shall Licensee settle any such allegation of infringement
without the prior written consent of Licensor. In the event that the
Licensor agrees in writing or it is necessary, in Licensors's
judgement, after a final judgement from a court of competent
jurisdiction from which no further appeal can be taken and with the
Licensor's prior written consent, for Licensee to make royalty or other
payments to a third party in order for the Licensee to make, have made,
use or sell or to continue making, having made, using or selling the
Product, Licensee shall be entitled to offset such amounts so paid to
any third party, against any amounts which may become due to Licensor
under this Agreement.
11. Confidentiality.
Each party hereto shall hold all Confidential Information in confidence and use
its diligent efforts (consistent with that which it uses to safeguard its own
Confidential Information) to safeguard Confidential Information and to prevent
the unauthorized use or disclosure of any Confidential Information. Each party
hereto shall ensure that its employees who have access to any Confidential
Information shall be made aware of and subject to these obligations. The
obligations of the parties hereto under this Section 11 shall survive for five
(5) years after the expiration or termination of this Agreement.
12. Representations, Warranties and Covenants.
(a) Licensor hereby represents, warrants and covenants the following:
(i) Licensor is a corporation duly organized, existing and in good
standing under the laws of Bermuda, with full right, power and
authority to enter into and perform this Agreement and to
grant all of the rights, powers and authorities herein
granted.
<PAGE>
(ii) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Licensor is a party, or Licensor's articles of incorporation
or bylaws.
(iii) This Agreement has been duly executed and delivered by
Licensor and is a legal, valid and binding obligation
enforceable against Licensor in accordance with its terms.
(iv) Licensor shall comply with all applicable laws, consent
decrees and regulations of any federal, state or other
governmental authority.
(v) To the best of Licensor's knowledge and belief as of the date
of this Agreement , there are no issued or pending patent or
trademark applications relating to the Product that would
prevent Licensee from using or selling the Product in the
Territory.
(b) Licensee hereby represents, warrants and covenants the following:
(i) Licensee is a corporation duly organized, existing and in good
standing under the laws OF ITALY, with full right, power and
authority to enter into and perform this Agreement and to
grant all of the rights, powers and authorities herein
granted.
(ii) The execution, delivery and performance of this Agreement do
not conflict with, violate or breach any agreement to which
Licensee is a party, or Licensee's articles of incorporation
or bylaws.
(iii) This Agreement has been duly executed and delivered by
Licensee and is a legal, valid and binding obligation
enforceable against Licensee in accordance with its terms.
(iv) Licensee shall comply with all applicable laws, consent
decrees and regulations of any federal, state or other
governmental authority.
(c) Indemnification:
<PAGE>
(i.) Licensor agrees to indemnify and hold harmless Licensee and
its Affiliates and their respective employees, agents,
officers and directors from and against any claims, losses,
liabilities, damages, costs and expenses (including reasonable
attorneys' fees) incurred by Licensee or its Affiliates
arising out of or in connection with any (a) breach of any
representation, warranty, covenant or obligation hereunder,
(b) claim or demand of any kind for injury to a person or
property arising from Licensor's or its manufacturer's
manufacturing, packaging, or labeling of Product; provided,
that this indemnification shall not apply if such
manufacturing, packaging, or labeling is conducted by or at
the direction of Licensee or its Affiliates; and provided,
further, that there has been no negligent act or omission with
respect to such Product by Licensee, its Affiliates,
employees, agents or manufacturers, (c) act or omission on the
part of Licensor or any of its employees or agents or
manufacturers in the performance of this Agreement, and (d)
third party claims alleging infringement of such third
parties' intellectual property rights as a result of the
manufacture or importation of Product into Territory under
this Agreement, and (e) payments, commissions or fees of any
kind due to consultants or brokers retained by Licensor
relating to Product.
(ii) Licensee agrees to indemnify and hold harmless Licensor and
its Affiliates and their respective employees, agents,
officers and directors from and against any claims, losses,
liabilities, damages, costs and expenses (including reasonable
attorneys' fees) incurred by Licensor or its Affiliates
arising out of or in connection with any (a) breach of any
representation, warranty, covenant or obligation hereunder,
(b) claim or demand of any kind for injury to person or
property arising from Licensee's marketing, distribution and
sale of Product, except to the extent that there has been a
negligent act or omission with respect to such Product by
Licensor, its employees, agents or manufacturers, (c) act or
omission on the part of Licensee or any of its employees or
agents in the performance of this Agreement (d) third party
claims alleging infringement of such third parties'
intellectual property rights as a result of the advertisement,
promotion or marketing materials created by or at the
direction of Licensee and used in connection with the sale of
Product hereunder, and (e) payments,
<PAGE>
commissions or fees of any kind due to consultants or brokers
retained by Licensee relating to Product.
(iii) A party seeking indemnification under this section 12(c) must
give prompt written notice thereof to the other party (the
"Indemnifying Party"). The Indemnifying Party shall have the
right to compromise, settle or defend any such claim, loss,
liability, damage, cost or expense.
13. Term of License
The duration of the subject Agreement shall be for ten (10) years from date of
first commercial sale in a country of the Territory renewable upon mutual
agreement for ten (10) year periods.
14. Termination
(a) This Agreement may be terminated upon the mutual written agreement of
the parties.
(b) Either party may terminate this Agreement forthwith by written notice
to the other, if the other party commits a material breach of any part
of this Agreement and such breach has not been remedied by the
defaulting party within sixty (60) days after written notice of such
breach has been given by the other. If the breach cannot be remedied
within sixty (60) days, the breaching party may submit a plan,
reasonably acceptable to the other party, outlining the steps that it
intends taking to cure the breach.
(c) This Agreement may also be terminated upon the giving of notice, if the
other party shall be involved in financial difficulties as evidenced:
(i) by its commencement of a voluntary case under any applicable
bankruptcy code or statute, or by its authorizing, by
appropriate proceedings, the commencement of such voluntary
case; or
<PAGE>
(ii) by its failing to receive dismissal of any involuntary case
under any applicable bankruptcy code or statute within sixty
(60) days after initiation of such action or petition; or
(iii) by its seeking relief as a debtor under any applicable law or
any jurisdiction relating to the liquidation or reorganization
of debtors or to the modification or alteration or the rights
of creditors, or by consenting to or acquiescing in such
relief; or
(iv) by the entry of an order by a court of competent jurisdiction
finding it to be bankrupt or insolvent, or ordering or
approving its liquidation, reorganization or any modification
or alteration of the rights of its creditors or assuming
custody of, or appointing a receiver or other custodian for,
all or a substantial part of its property or assets; or
(v) by its making an assignment for the benefit of, or entering
into a composition with its creditors, or appointing or
consenting to the appointment of a receiver or other custodian
for all or a substantial part of its property.
(d) Licensee may terminate this Agreement after 3 years with one year
written notice if the product is not a commercial success, and on 90
day's notice at any time during the Agreement for reasons of safety or
efficacy.
(e) The failure by a party to exercise its rights to terminate this
Agreement pursuant to this Section (14) in the event of any occurrence
giving rise thereto shall not constitute waiver of the rights in the
event of any subsequent occurrence.
15. Publicity
The parties hereto shall coordinate the preparation and issuance of any public
announcement of this Agreement. Any such announcement shall comply with relevant
Securities and Exchange Commission requirements and shall take into account any
reasonable concern regarding the trade. The wording of such announcement shall
be agreed upon by the parties before release.
<PAGE>
16. Inspections and Audits
(a) At reasonable intervals during each year of the manufacture by any
manufacturing facility, each party hereto or its agents shall have the
right to inspect, upon reasonable prior written notice to the other
party hereto and at times mutually agreed upon, the manufacturing and
quality control facilities of such party (and/or its contract
manufacturers) during customary business hours for such facilities.
Licensor shall direct its contract manufacturers to permit such
inspection visits by Licensee, as described above.
(b) Licensee shall keep accurate records of all Product sales and other
relevant data concerning the Product for a period of two (2) years
following the year in which such records were created and Licensee
shall provide Licensor quarterly reports thereof at the same time that
amounts are paid pursuant to this Agreement. Such reports shall state
the number of Units of Product manufactured by it or its Affiliates and
the number of units of Product sold by it or its Affiliates during the
applicable quarter as well as the number of free samples of Product and
any returns together with an accounting of any other applicable
components of the amounts paid or to be paid hereunder. Once a year,
upon reasonable notice at time mutually agreed upon and during business
hours, Licensor at Licensor's cost may have the accounts of Licensee
relating to the Product reviewed by independent certified public
accountants appointed by the Licensor and reasonably approved by the
Licensee, in order to verify amounts due under this Agreement. Licensee
shall promptly pay any underpayment evidenced by such audit. In the
event such an audit evidences an underpayment of more than five percent
(5%) with respect to the amounts actually paid, Licensee shall promptly
pay such underpayment to Licensor with interest at the prime rate as
set by Citibank, from the time when such underpayment's accrued, and
shall reimburse Licensor for the reasonable costs and expenses
(including fees) of such audit.
(c) Licensor shall keep accurate records of its Direct Costs of
manufacturing Product for a period of two (2) years following the year
in which such records were created. Upon reasonable notice and during
business hours and at times mutually agreed upon, Licensee shall have
the right to review such records. Once a year, upon reasonable notice
and during business hours, Licensee at Licensee's cost may have the
accounts of Licensor relating to the Direct Costs of manufacturing
Product reviewed by
<PAGE>
independent certified public accountants appointed by the Licensee and
reasonably approved by the Licensor, in order to verify amounts due
under this Agreement. Licensor shall promptly pay any overpayment
evidenced by such audit. In the event such audit evidences an
overpayment of more than five percent (5%) with respect to the amounts
actually paid, Licensor shall promptly refund such overpayment to
Licensee with interest at the prime rate as set by Citibank, from the
time when such overpayments accrued, and shall reimburse Licensee for
the reasonable costs and expenses (including fees) of such audit.
17. Notices
All notices required hereunder shall be in writing and shall be deemed to be
properly given if sent by registered, overnight or certified mail to the party
to be notified at the address set forth on page 1 hereof, or at such other
latest address as either party may hereafter designate in writing to the other;
provided that a copy of each notice to be sent to Licensor hereunder shall also
be sent by the same means to William J. Bologna, Chairman of the Board, Columbia
Laboratories Inc., 2875 NE 191st Street Suite 400, Miami Florida 33180, USA; and
further provided that a copy of each notice sent to Licensee hereunder shall
also be sent by the same means to Giuseppe-Giampiero Miglio Chairman and CEO,
Mipharm SpA., Via B. Quaranta 12, 20141 Milano, Italia The date of service of
any notice so sent by registered or certified main shall be the date of receipt.
18. Ownership Change: Assignment; Successors
This Agreement shall be binding on and inure to the benefit of the successors
and assigns of the parties, including any Affiliate, subsidiary, division or any
entity controlled by either party. Licensee may not sublicense or assign this
Agreement in whole or in part, without the consent in writing of Licensor, and
any purported assignment without such consent (which may be withheld without
reason) shall be void; provided, that Licensee may upon notice to Licensor
assign this Agreement to any of its Affiliates, but may not then sell such
Affiliate without Licensor's prior written consent unless this Agreement is
first assigned back from such Affiliate to Licensee. Licensor may not assign its
rights under this Agreement, in whole or in part without written Agreement by
the Licensee; provided that Licensor may upon notice to Licensee assign all or
any portion of this Agreement to any of its Affiliates, but may
<PAGE>
not then sell such Affiliate without Licensee's prior written notice unless this
Agreement is first assigned back from such Affiliate to Licensor.
If any person, individually, or in concert with others, shall acquire directly
or indirectly, through one or more intermediaries, the beneficial ownership of
fifty percent or more of the equity or assets of Licensor during the term of
this Agreement, or from Licensee, the beneficial ownership of fifty percent or
more of the equity the party not being acquired may require from the new owners
of the acquired party a written affirmation of its intent and capability to
comply with all the terms of this Agreement. Under no circumstances shall such
action by Licensor interfere or compromise the continued supply of Product to
Licensee, provided however that Licensee in such event shall have the option of
terminating the Agreement.
19. Tax
All taxes levied on account of any payments accruing under this Agreement which
constitutes income to Licensor, shall be the obligation of the Licensor, and if
provision is made in law or regulation for withholding, such tax shall be
deducted from any payment then due, paid to the proper taxing authority, and
receipt for payment of the tax secured and promptly sent to Licensor.
20. Independent Contractors
The relationship of the parties under this Agreement is that of independent
contractors. Neither party shall be deemed to be the agent of the other and
neither is authorized to take any action binding upon the other.
21. Entire Agreement; Modification
This Agreement contains the entire understanding between the parties hereto
relating to the subject matter hereof, there being no terms and conditions other
than those set forth herein,
<PAGE>
and it supersedes all prior agreements, written or oral, between the parties
hereto with respect to the matters covered hereunder. This Agreement may not be
modified, altered or otherwise changed other than by an instrument in writing,
duly executed by each of the parties hereto.
22. Severability
If any provision of this Agreement should be or becomes fully or partly invalid
or unenforceable for any reason whatsoever or should be adjudged to violate any
applicable law, this Agreement is to be considered divisible as to such
provision and such provision is deemed to be deleted from this Agreement, and
the remainder of this Agreement shall be valid and binding as if such provision
were not included herein; provided, however, that this Agreement is not rendered
fundamentally different in its content or effect.
23. Effects of Headings
The headings for the paragraphs of this Agreement are to facilitate reference
only, do not form a part of this Agreement, and shall not in any way affect the
interpretation hereof.
24. Choice of Law
This Agreement and performance hereof shall be construed and governed by the
laws of the State of New York, United States of America. Any dispute, hereto
arising in connection with this Agreement shall be finally settled under the
Rules of Arbitration of the International Chamber of Commerce by three
arbitrators appointed in accordance with said Rules, the arbitration to be
conducted in English in Paris, France.
25. No Waiver
No delay or omission or failure to exercise any right or remedy provided for
herein shall be deemed to be a waiver thereof or acquiescence in the event
giving rise to such right or remedy.
26. Counterparts
<PAGE>
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which, when sow
executed shall be deemed an original, but all such counterparts shall constitute
but one and the same instrument.
27. Further Assurances
Licensor and Licensee each agree to produce or execute such other documents or
Agreements as may be necessary or desirable for the execution and implementation
of this Agreement and the consummation of the transactions contemplated hereby.
28. Bankruptcy
All Trademark, Patent and Technology rights and licenses granted to the Product
under or pursuant to this Agreement by Licensor to Licensee are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy
Code, licenses of rights to "intellectual property" as defined under Section 101
(60) of the Bankruptcy Code. The parties hereto agree that so long as Licensee,
as a Licensee of such rights under this Agreement, makes all payments to
Licensor required under this Agreement, Licensee shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code. The parties
further agree that, in the event that any proceeding shall be instituted by or
against Licensor seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking and entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or any substantial part of its property or it shall take an
action to authorize any of the foregoing actions, Licensee shall have the right
to retain and enforce its rights under this Agreement with respect to the
Product.
29. Force Majeure
No failure or omission by a party hereto in the performance of any obligation of
this Agreement shall be deemed a breach of this Agreement nor shall it create
any liability if the same shall arise from any cause or causes beyond the
control of the party, including but not limited to, the following, which, for
the purposes of this Agreement, shall be regarded as
<PAGE>
beyond the control of the party in question: acts of God, acts of omission of
any government, any rules, regulations, or orders issued by any governmental
authority or any officer, department, agency, or instrumentality thereof, fire,
storm, flood, earthquake, accident, war, rebellion, insurrection, riot,
invasion, strikes, lockouts; provided however, that the party so affected shall
use its best efforts to avoid or remove such causes of nonperformance and shall
continue performance hereunder with the utmost dispatch whenever such causes are
removed.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day and
year first above written.
Columbia Laboratories (Bermuda) Ltd. Mipharm SpA
Paris, 5th of March 1999 Paris, 5th of March 1999
By By
----------------------------------- ------------------------------
William J. Bologna Giuseppe G. Miglio
Chairman of the Board Chairman of the Board
Exhibit 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Net income (loss) $ 140,110 $ (3,197,425)
Less: preferred stock dividends (59,968) -
---------------- ---------------
Net income (loss) applicable to common stock $ 80,142 $ (3,197,425)
================ ===============
Basic:
Weighted average number of common shares outstanding 28,685,000 28,660,000
================ ===============
Basic net income (loss) per common share $ .00 $ (.11)
================ ===============
Diluted:
Weighted average number of common shares outstanding 28,685,000 28,660,000
Weighted average number of dilutive common equivalents 300,000 -
---------------- ---------------
Weighted average number of common and common
equivalent shares outstanding 28,985,000 28,660,000
================ ===============
Diluted net income (loss) per common share $ .00 $(.11)
================ ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,921,497
<SECURITIES> 0
<RECEIVABLES> 4,015,246
<ALLOWANCES> 209,829
<INVENTORY> 1,782,463
<CURRENT-ASSETS> 9,524,379
<PP&E> 2,510,599
<DEPRECIATION> 1,255,483
<TOTAL-ASSETS> 16,431,375
<CURRENT-LIABILITIES> 4,776,640
<BONDS> 0
0
92
<COMMON> 286,846
<OTHER-SE> 1,367,797
<TOTAL-LIABILITY-AND-EQUITY> 16,431,375
<SALES> 5,466,461
<TOTAL-REVENUES> 5,466,461
<CGS> 1,776,841
<TOTAL-COSTS> 1,776,841
<OTHER-EXPENSES> 3,732,501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,838
<INCOME-PRETAX> 165,110
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 140,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,110
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
