UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
FORM 8-K/A#3
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
_______________
Date of Report (Date of earliest event reported): July 31, 1997
SERAGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-19855 04-2662345
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
97 South Street, Hopkinton, Massachusetts 01748
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 435-2331
Item 5. Other Events.
This report on Form 8-K/A pertains to an Evaluation License and
Option Agreement entered into by the Registrant and United States Surgical
Corporation ("US Surgical") on July 31, 1997 (the "License and Option
Agreement"). Under the License and Option Agreement, the Registrant has
granted US Surgical an exclusive, worldwide license (the "Evaluation License")
(i) to evaluate, during a due diligence period of up to fifteen (15) months
(the "Due Diligence Period"), Registrant's technology and products
incorporating a fusion protein consisting of a diphtheria-based toxin and an
EGF-targeting moiety (the "Technology") for restenosis in cardiovascular
applications (the "Field") and (ii) to make, have made, use, practice,
manufacture and have manufactured products incorporating the Technology
in the Field in connection with US Surgical's evaluation of the Technology.
In consideration for the grant of the Evaluation License and the Option, US
Surgical made a payment to the Registrant of $5,000,000 (the "Option
Payment"). The Registrant, in turn, was required to pay on behalf of US
Surgical an investment banking fee of $250,000 incurred by US Surgical in
connection with its entry into the License and Option Agreement. The
Registrant also granted to US Surgical five (5) year warrant to purchase
500,000 shares of the Registrant's common stock, par value $.01 per share
(the "Common Stock"), at an exercise price equal to $0.5625 per share, the
closing sales price on 7/30/97(the "Stock Purchase Warrant").
In addition, the License and Option Agreement grants to US Surgical
an exclusive option (the "Option") to acquire an exclusive, worldwide license
to the Technology in the Field (the "Permanent License"). The Option is
exercisable by US Surgical at any time during this Due Diligence Period in
consideration for an additional payment to Seragen of $5,000,000. Upon
exercise of the Option, US Surgical and the Registrant would enter into a
license agreement having commercially reasonable and customary terms and
conditions (the "Permanent License Agreement").
Among the terms and conditions to be included in the Permanent
License Agreement is the obligation of US Surgical to pay the following
amounts to the Registrant upon achieving the corresponding milestones:
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Milestones Payment
__________ _______
First IND approval in the United States, and equivalent
approval in Europe or Asia for phase I/II clinical trials
(provided that, if the trials are conducted simultaneously
in the United States and Europe/Asia, then such payment
shall be made upon receipt of both the IND approvals for
both trials; and provided further that if a clinical trial
is commenced in only the United States or only in Europe
or only in Asia, then such payment shall be made upon receipt
of the first such IND approvals). $ 2,500,000
Initiation of first phase III clinical trial in the United
States, or any equivalent trial in Europe or Asia. $ 5,000,000
First Filing of a BLA with the Food and Drug
Administration ("FDA") in the United States, or any
equivalent filing in Europe or Asia, for EGF Fusion Protein. $ 5,000,000
Receipt of first approval letter from FDA in the United
States, or the equivalent thereof in Europe or Asia, for EGF
Fusion Protein. $10,000,000
In addition, the Permanent License Agreement will include a
provision that requires US Surgical to pay the Registrant (i) a royalty in an
amount equal to five percent (5%) of US Surgical's net sales on the sale of
products that incorporate the Technology and (ii) a royalty in an
amount equal to twenty-five percent (25%) of all royalties received by US
Surgical in connection with the sublicensing of its rights in and to the
Technology.
In the event US Surgical does not exercise this Option, (i) the
Evaluation License will terminate and (ii) US Surgical will receive $5,000,000
in the Registrant's common stock valued at the average of the closing price of
the common stock (1) for the ten trading days preceding July 31, 1997, or (2)
for the ten trading days preceding the date which US Surgical chooses not to
exercise the Option, whichever is lower. The Company will record the $5.0
million initial payment from USSC as a liability. In the event that USSC
exercises its option to license the EGF Fusion Protein, the $5.0 million will
be recorded as revenue at that time. In the event that USSC chooses not to
exercise the option, the $5.0 million will be recorded as stockholders'
equity.
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The License and Option Agreement also requires that, during the Due
Diligence Period, the Registrant use the Option Payment only in the ordinary
course and that it not be used (i) to pay dividends or distributions, or any
other payments, to any preferred shareholders of the Registrant or any of
their corporate affiliates or (ii) to make any payments currently in arrears
under any agreement, contract, royalty agreement or similar instrument (other
than those occurred in the ordinary course of business). During the Due
Diligence Period, the Registrant also is required to conduct its business in
the ordinary course and to preserve its business and assets free and clear of
all liens (other than those incurred in the ordinary course and those approved
by US Surgical). However, nothing in the License and Option Agreement will
prevent the Registrant from effecting any equity financing or the merger or
consolidation of the Registrant or the sale of all or substantially all of its
assets.
Leon C. Hirsch, who beneficially owns more than 5% of the
Company's Common Stock, is the Chairman of USSC and beneficially owns
7.8% of the Common Stock of USSC. Turi Josefson, who beneficially owns
more than 5% of the Company's Common Stock, is a director of USSC and
beneficially owns 1.8% of the Common Stock of USSC. John R. Silber, a
director of the Company, is a director of USSC and beneficially owns
.02% of the Common Stock of USSC.
Safe Harbor Information
Some of the statements contained in this document are forward-looking,
including statements relating directly or by implication to the Registrant's
products, operations, strategic partnerships, and ability to fund its
operations. These statements are based on current expectations and involve a
number of uncertainties and risks, including (but not limited to) the
Registrant's ability to proceed with successful development, testing, and
licensing of its products and the Registrant's ability to enter into
additional strategic partnerships and other collaborative arrangements or to
raise additional capital on satisfactory terms. For further information,
refer to the "Business Outlook" section in the Registrant's Form 10-K as filed
with the Securities and Exchange Commission. Actual results may differ
materially from such expectations.
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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 hereunto duly authorized.
SERAGEN, INC.
(Registrant)
Date: November 7, 1997 /S/ Reed R. Prior
__________________
Reed R. Prior
Chairman of the Board and
Chief Executive Officer
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